The Consumer Financial Protection Bureau (CFPB) has taken important action to curb the exorbitant interest rates, debt traps, and collections practices of payday lenders. As written, the rules will have little impact on current practices, make enforcement unlikely, and create new footholds in states that currently ban payday lending. This presents dangerous implications for survivors of domestic and sexual violence who are at particular risk of economic and physical harm.
The CFPB has an opportunity to limit the abusive grip of payday lending that increases danger for survivors struggling to find freedom from abusive partners. In the absence of being able to cap the rates on these abusive high-cost loans, the CFPB rule must close these loopholes and strengthen provisions to ensure a meaningful ability to repay test for each and every loan to curb the vicious cycle of debt for survivors of sexual and domestic violence. A strong CFPB rule will foster creative short-term lending interventions and financial options that increase long-term safety for survivors of violence.
Payday lending mirrors coercive control & compounds survivors’ economic insecurity. Abusive partners use economic coercion to undermine survivors’ ability to maintain economic stability and to create dependence on the abusive partner, thereby making it harder for survivors to escape from future violence. For survivors, abuse can create a financial trap, which serves as a barrier to long-term safety. Predatory lending practices compound this financial trap, further limiting survivors’ economic options and exposing them to increased risk of physical violence for years to come.
Click here to view the CSAJ Factsheet on the Debt Trap for Survivors.
The CFPB has extended its deadline for comments to this Friday, October 7th . You can share your comments here.