The Consumer Financial Protection Bureau ("CFPB") held a field hearing in Kansas City, MO to announce a proposed rule regulating payday and short-term lending.
The new rule seeks to end the debt trap caused by payday and other forms of short-term lending.Currently, many payday lenders knowingly provide short-term loans to borrowers who are unable to repay them. As a result, borrowers are often forced roll-over the original loan into subsequent loans and incur significant fees.
The CFPB field hearing provided several leaders, including City of St. Louis Treasurer Tishaura Jones, with the opportunity to weigh in on the proposed rule. During the hearing Treasurer Jones applauded the CFPB for taking "bold action" on short-term lending and noted the predatory nature of the industry.
"Predatory lenders only open in neighborhoods that have credit scores of 500 or less, prey on poor and minority populations, and keep people in poverty" stated Jones. Jones also urged coupling short-term lending reform with financial literacy education. Jones said: "I would hope that one of the proposed reforms includes financial education and free credit counseling to keep people from sinking into the debt trap."
The CFPB chose to hold their field hearing in Kansas City due in part to Missouri's notoriously lax regulations on payday lending. Missouri's maximum allowed APR on payday lending is an astonishing 1950%. Missouri also is the only state that does not limit loan renewals and rollovers, which all eight of its border states have prohibited outright. As a result there are more payday lenders in Missouri than McDonalds, Wal-Mart's, and Starbucks combined.
The St. Louis Treasurer's Office opened an Office of Financial Empowerment in City Hall last year to help people make better decisions with their money. Since opening, the Office of Financial Empowerment has educated over 1,200 citizens through individual credit counseling, financial literacy workshops, and providing access to mainstream banking products.