Enforcing New Federal Payday Loan Protections Would Provide Financial Relief for Texans

AUSTIN, Texas — Texas Appleseed is deeply concerned by the CFPB's announcement that it will not enforce its own rule restricting some of the harmful practices of payday lenders. The CFPB rule ensures that a payday or other high-cost lender can only make two consecutive attempts to withdraw a payment from a customer’s bank account if there are insufficient funds in the account. A new ACH authorization would be required for future withdrawals. This protection is designed to address problems many borrowers face with accumulating overdraft fees and non-sufficient funds fees that too often lead to added indebtedness and account closures.

"Economic security for working families depends on effective enforcement of consumer protections," said Ann Baddour, Director of Fair Financial Services at Texas Appleseed. “We call on the CFPB to enforce existing rules, including the newly effective payday lending protections.”

The rule, which applies to any loan with an annual percentage rate of above 36%, is a simple backstop to offer some protection for individuals from a cycle of ongoing debt too often caused by high-cost loans. It was initially adopted eight years ago. The rule is grounded in in-depth research and consumer experiences and was vetted by two CFPB directors, one appointed by President Obama and the other by President Trump in his first term. It has also passed the scrutiny of multiple courts, including the U.S. 5th Circuit Court of Appeals and the U.S. Supreme Court.

The payday lending industry has long exploited Texans living paycheck to paycheck, trapping them in loans with interest rates that often exceed 500% APR. A recent report by the Center for Responsible Lending found that Texans took out 8% of payday loans nationally, but paid over half the total fees collected by payday lenders nationwide. Texas residents are also plagued by other high-cost lenders, such as auto title loans and online loan options. 

The CFPB was created after the 2008 financial crisis to prioritize consumer protection. Baddour continued, “With so many families struggling with high food and housing costs, we need a strong CFPB now more than ever to ensure everyday Americans are not harmed or exploited by financial service practices in their time of need.”

About Texas Appleseed

As one of the most trusted resources for data-driven policy analysis and solutions, Texas Appleseed advocates at the state and local level for fair, just, and equitable laws. Our work has shaped hundreds of laws and positively affected millions of Texans by breaking down barriers through transformative policy solutions. Visit www.TexasAppleseed.org for more information.

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