New York Times: Progress on Predatory Lending
Rules issued in November to stop banks from emulating predatory payday lenders have yielded promising results. The rules, issued by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, have led several banks to discontinue “deposit advance” loans that are specifically designed to trap people in debt.
But new forms of exploitation will invariably arise unless the Consumer Financial Protection Bureau writes broad affordability rules of its own. These rules, suggested by The Pew Charitable Trusts’ Safe Small-Dollar Loans Research Project, would limit monthly loan payments to 5 percent of the borrowers’ pretax income, spread the costs of fees and interest over the life of the loan and require clear disclosure of all costs. Rules like these will give unsuspecting borrowers even more protection from being ambushed by debt.
Read the complete editorial at nytimes.com.