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New Report Highlights Abuses in Payday, Car-Title Loans

A new report slams abuses in the payday and car-title loan industry. (Kelly Griffith/Center for Economic Integrity)
A new report slams abuses in the payday and car-title loan industry. (Kelly Griffith/Center for Economic Integrity)
August 30, 2016

PHOENIX - Predatory lending leads to serious abuses against consumers, and a new federal rule is necessary to combat the problem, according to a report released today by Arizona Public Interest Research Group Education Fund.

Researchers analyzed close to 10,000 complaints made to the Consumer Financial Protection Bureau in the past few years. They found that 91 percent involved excessive debt-collection practices, bank account closures, and/or long-term cycles of debt.

Kelly Griffith, executive director of the Center for Economic Integrity in Tucson said the feds should adopt a proposed rule that would force lenders to determine, ahead of time, the borrower's ability to pay and still afford necessities such as rent and food.

"This is more of a lending scheme or scam, and they lend based on their ability to collect, not on the borrower's ability to repay," she said.

The report also found that around 15 companies accounted for more than half of the complaints, many charging triple-digit interest rates. The report said the biggest offenders are doing business under the names CashNetUSA, NetCredit, Delbert Services, Check 'n Go, CashCall and ACE Cash Express.

Car-title loans are rampant in Arizona but payday lending is illegal. Voters rejected an initiative to revive payday loans in 2008 by a 2-to-1 margin and the Legislature voted down a similar bill last session.

Griffith said the CFPB's proposed rule, however, contains a massive loophole, that would allow companies to make up to six loans to each borrower per year before verifying income.

"We call this sort of a business-as-usual situation, because if you don't determine a borrower's ability to repay right up front with the first loan and every loan, then these six loans are just going to do irreparable harm and the lender has no motivation to change their business model," she explained.

The public comment period on the new rule ends on October 7th. You can find a link to the complaint form at stoppaydaypredators.org.

Suzanne Potter, Public News Service - AZ