Opportunity Alliance Nevada

To build financial stability for all Nevadans

Statement on Payday Lending Rule

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For Immediate  Release

October 6, 2017 by Lynne Keller, Executive Director

New CFPB Rule Will Help Nevada Families Against Payday and Car Title Lending Debt Traps

New Federal Consumer Protection Will Protect Families Against Predatory and Abusive Payday Lending Practices

Reno, Nevada — Today’s release by Consumer Financial Protection Bureau (CFPB) of their final small-dollar loan rules represents a much-needed first step towards ending the debt trap perpetuated by payday and auto-title lenders. Opportunity Alliance Nevada welcomes the CFPB’s long- awaited rules and calls on members of Nevada’s U.S. Congressional delegation to support this important rule, which can help protect Nevada residents from the payday debt trap.

Each year, Payday and car title lending costs Nevada families $182 million in abusive fees. The loans drive borrowers into financial distress by trapping them in long-term debt at triple-digit interest rates. Three quarters of all payday loan fees are from borrowers with more than ten loans in the course of a year.

At the heart of the Consumer Bureau rule is the common sense principle that lenders check a borrower’s ability to repay before lending money – something supported by more than 70% of Republicans, Independents, and Democrats. In releasing today’s rule, the CFPB makes it clear that the rule is a floor for consumer protections, not a ceiling, and that it does not prevent states from enacting stronger laws, such as a rate cap.

Although today’s rule addresses only the ability-to-repay standards for short-term loans, it does recognize that long-term high-cost loans are also harmful. The CFPB is continuing their work to address those too. Payday lenders have a long history of exploiting loopholes where they can find them, and state usury caps prevent this exploitation. The rate cap also ensures that borrowers are protected against the harms of these high-cost loans regardless of whether they are structured as short-term or long-term loans.

“The action by the Consumer Financial Protection Bureau today represents a much-needed first step towards ending the debt traps that underpin the payday and auto-title lending business model,” said Lynne Keller, Executive Director of Opportunity Alliance Nevada. “While we applaud the CFPB for taking this step to put safeguards in place for Nevada families, we call on our lawmakers in Washington to preserve and protect these important rules. We also urge the CFPB to address high-cost installment loans, which create a longer, deeper trap for borrowers. Payday lenders are already pushing these harmful products, and families are suffering in states where they are legal. By taking these additional steps, the Consumer Bureau can liberate Nevada and all American families from the scourge of legalized loansharking.”

The full CFPB rule can be found here: payday rule on CFPB website.

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Opportunity Alliance Nevada partners with public, private, and nonprofit organizations to provide them tools and resources to strengthen the financial capability of their clients and to advocate for policies that increase the financial well-being of Nevadans.

State of Financial Well-Being in America

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This is a report that provides a first-of-its-kind view into the state of financial well-being in America using the Consumer Financial Protection Bureau (CFPB) Financial Well-Being Scale to measure people’s sense of financial freedom and security. The report summarizes the results of a survey showing, among other things, that:

  • People’s sense of financial well-being varies significantly in ways that are not entirely aligned with differences in income, education and other commonly used economic measures.
  • People’s sense of financial well-being is grounded in real life financial circumstances.
  • Many factors associated with large differences in levels of financial well-being are currently the focus of a range of financial capability programs.

Here are two additional resources to help practitioners and researchers:

Road to Zero Wealth Report

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In this report, we look at the racial wealth divide at the median over the next four and eight years, as well as to 2043, when the country’s population is predicted to become majority non-white. We also look to wealth rather than income to reconsider what it means to be middle class. In finding an ever-accelerating gap, we consider what it means for the American middle class and we explore what policy interventions could reverse the trends we see today. We find that without a serious change in course, the country is heading towards a racial and economic apartheid state.

According to our new report released today, The Road to Zero Wealth, families of color are on track to see their median wealth hit zero within our lifetime, making the prospects of transferring wealth to the next generation difficult or impossible. The research featured in the new report looks at median household wealth and excludes durable goods like cars, appliances and electronics. When we remove these from our calculations, a typical Black family has just $1,700 in owned wealth—1.3% of the wealth owned by a typical White family ($132,000). And, the lack of wealth facing Black families isn’t just isolated to them; Latino families fare just barely better, with their median wealth standing at only $2,000.

In fact, if the median household wealth trends of the past 30 years continue (during which time Black and Latino families have seen their wealth decrease by a full 75% and 50%, respectively), by 2020, Black and Latino families are projected to lose an additional 18% and 12% of wealth they own today, respectively. Then, by 2024, Black and Latino households at the median are set to lose an additional 10% of their wealth. For those keeping count, this means a 20-30% decrease for the already low level of wealth held by each community today. In stark contrast, during this same timeframe, White households are projected to see their median wealth rise by five percent over where things stand today.

Click Here to Download Report