October 17, 2016
By Bob Coleman
Editor, Main Street Monday
Main Street Monday — SBA Opposes CFPB Payday Lending Proposed Regs
Why do we care about SBA’s support of payday lenders?
Because, next up on the Consumer Financial Protection Bureau’s agenda will be rules affecting small business lenders — especially online lenders — the lenders that have been called payday lenders for small business owners.
It will be interesting to see if SBA will choose access to Main Street capital issues over predatory interest rates sometimes exceeding 100% APR.
The CFPB says risky lender practices are “pushing borrowers into debt traps.”
Almost 70 percent of payday loan borrowers take out a second loan within 30 days, and one in five new borrowers ends up taking out at least 10 or more loans, paying more fees and interest on the same debt.
The agency’s proposed rules would not prohibit all payday, auto title or other high-costs loans, but they would require lenders to verify income and determine repayment ability.
That would make it difficult, if not impossible, for many payday lenders to remain in business, says Darryl DePriest, chief counsel in the SBA’s Office of Advocacy.
He urged the CFPB to instead develop requirements to protect consumers without jeopardizing their access to legitimate credit in states that do not currently regulate payday lending.