Ohio Senator Sherrod Brown has written CFPB director Richard Cordray to explicitly demand that the federal empowered consumer watch dog group take a closer regulatory look at payday and other small amount lenders. Senator Brown’s letter comes in the wake of a decision by the Ohio Supreme Court that upheld the rights of payday lenders.
“Because most small-dollar, short-term loans possess three of the ‘Four D’s’ that negatively affect consumers – deception, debt traps and dead ends – the CFPB must address the full spectrum of products being offered,” Brown wrote.
The Ohio Supreme Court unanimously ruled last week that the state’s Short Term Lending Act did not prevent the companies from issuing payday loans under different lending licenses. This is an endemic problem for states looking to purge triple digit inflation charging short term lenders from within their borders, as companies can declare themselves a different type of lender, and carry on with identical practices.
“It is clear that the state-based system of regulating alternative financial products contains deficiencies that run counter to the CFPB’s mission,” Brown wrote. “Therefore, the CFPB must use its robust consumer protection authority to write rules for small-dollar lenders that will fill the gaps left by inadequate state laws.”
Cordray told the U.S. Senate last week the CFPB is in the process of drafting short-term lending rules that close the loopholes that payday lenders can use to circumnavigate state regulations.
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