CFPB REPORT FINDS PAYDAY LOAN COMPLAINTS DECREASED 14%
Since the economic collapse of 2007-2008, the payday loan industry has gotten a bad reputation. With millions of Americans turning to payday loans to help pay for their overdue light bill, late rent payments or their broken down car, there have been many reports that payday loan stores have taken advantage of these situations with exorbitant interest rates and other charges.
This is why so many politicians in various jurisdictions have presented legislation in the name of protecting consumers. Community activists and an array of organizations have lauded lawmakers in coming up with legislation that reins in the payday loan industry while shielding consumers.
But the key question is: do consumers really want these protections? Are they dissatisfied with the way payday loan stores operate? If you look at data from one watchdog agency then no.
According to a new Consumer Financial Protection Bureau (CFPB) report, the number of payday loan complaints the federal organization has received has gone down by a significant number.
Payday loan complaints have decreased 14 percent based on a three-month average from January to March 2016 when compared to the same time last year. The CFPB received 489 complaints in the first quarter of 2015, which then declined to 420 this year. This is a continuing trend as the CFPB reported a decrease in its March 2016 complaint report.
In total, the CFPB has received 859,900 complaints nationally as of Apr. 1, 2016. The federal consumer watchdog agency has received complaints about a wide variety of businesses and industries, including mortgages, other financial services and student loans.
This comes as it was reported that the CFPB is looking to hone in on the largest marketplace lenders in the United States, especially those working online.
It’s suggested that the CFPB will bring in online and offline lenders under its purview within the next year. This means lenders would face the same level scrutiny that the financial industry faces on a daily basis.
Presently, money lenders that offer bad credit loans are not under any federal supervision, though they are required to abide by Federal Trade Commission (FTC) laws, Security and Exchange Commission (SEC) requirements and CFPB consumer protection rules. But this isn’t enough, says Michael Gordon, partner at WilmerHale and former senior counselor to CFPB Director Richard Cordray.
“The power to examine companies is more subtle and often more powerful than filing lawsuits,” said Gordon. “If the bureau establishes authority in this area, marketplace lenders will need to quickly re-examine their regulatory compliance models and infrastructure.”
Critics say that it’s these types of initiatives that are limiting Americans’ credit choices.
The Heritage Institute’s Diane Katz published an op-ed this week that opined that the CFPB is minimizing choice among Americans and their options to access credit. Many of the new rules, says Katz, have applied restrictions on banks and financial services’ products, including credit cards, ATM services, auto lending and leasing, electronic funds transfers and student loans.
“Prior to the 2008 financial crisis, there certainly was a need to modernize the federal consumer protection regime,” Katz writes. “But a lack of consumer protection was not a major factor in the 2008 financial crisis. Now, however, the structural flaws of the CFPB are contributing to a different crisis: an ever-expanding administrative state that is suffocating free enterprise and individual liberty.”
Nevertheless, the CFPB believes that its intervention has allowed for greater transparency and accountability.