The Silicon Valley Community Foundation has announced that a group of community foundations has signed a letter to the head of the Consumer Financial Protection Bureau urging the agency to take action to curb predatory payday lending practices.
Led by SVCF president and CEO Emmett Carson, the coalition of fifty-seven foundations is calling on CFPB director Richard Cordray to push for rules that would curtail payday lending practices that routinely lead consumers into long-term debt. The move, which marks the first time a group of community foundations has joined to advocate for a national public policy issue, follows a recent announcement by the CFPB that it is considering new rules that would require lenders to verify a borrower's ability to repay a loan on time without re-borrowing to do so, as well as restrictions on lenders’ ability to collect from consumers' bank accounts.
"We are very aware of the harmful effects caused by payday loans that come with triple-digit interest rates and a two-week repayment period that can trap consumers in a vicious cycle of debt," the coalition stated in its letter. "The CFPB has before it a unique opportunity, and indeed obligation, to bring tough regulations and enforcement to the marketplace."
Payday loans, also known as "cash advances" or "check loans," typically are small loans of less than $500 that trigger a high annual interest rate if they are not repaid in full by the borrower's next payday. Generally targeted at individuals in poor communities, they often lead to high bounced check and overdraft fees for borrowers.
"Low-income neighborhoods across the United States are being assailed by predatory payday lenders whose loans can carry annual interest rates of 400 percent," said SVCF president and CEO Emmett Carson. "When more than fifty community foundations representing different communities across the U.S. speak as one about these harmful practices, it is a powerful message that federal regulators should take action."