Payday loans, also called small-dollar loans, provide quick access to cash in exchange for full payment plus variable interest rates, typically within two to four weeks after the loan was provided. Many borrowers use payday loans as a quick fix when ordinary living expenses get too high—the average payday loan borrower makes about $30,000 a year with a credit score in the low 500s. More than 19 million households use payday loans.
While payment arrangements like these might seem like a reasonable solution to some, the interest rates and fees can be high.
The CFPB rule says lenders are restricted from making loans that borrowers are unable to pay back with accrued interest. The rule also limits the number of consecutive loans that can be taken and requires longer repayment timelines.
The bill — sponsored by Rep. Dennis Ross (R-FL) and co-sponsored by Reps. Alcee Hastings (D-FL), Tom Graves (R-GA), Henry Cueller (D-TX), Steve Stivers (R-OH) and Collin Peterson (D-MN) — would repeal the rule and prevent the bureau from issuing a similar rule in the future.
The lawmakers said these small-dollar loans are already regulated in all 50 states, so federal regulations are not necessary.
“More than 1.2 million Floridians per year rely on Florida’s carefully regulated small-dollar lending industry to make ends meet. The CFPB’s small-dollar lending rule isn’t reasonable regulation — it’s a de facto ban on what these Floridians need,” Ross said. “I and my colleagues in Congress cannot stand by while an unaccountable federal agency deprives our constituents of a lifeline in times of need, all while usurping state authority. Today, we are taking bipartisan action to stop this harmful bureaucratic overreach dead in its tracks.”