Consumer Financial Protection Bureau introduced new rule this morning to address abuses with small consumer loans

RALEIGH (June 2, 2016) – The Consumer Financial Protection Bureau released a new rule for public comment this morning to address problems associated with small consumer loans, but North Carolina advocates say the rule is inadequate.

“The rule has potentially harmful exemptions and loopholes,” said Al Ripley, Director of the Housing and Consumer Project at the North Carolina Justice Center. “While we are very supportive of the CFPB as an agency, having seen first-hand the harm that payday loans caused in North Carolina, our initial review indicates that this proposed rule is simply not strong enough to control some of the rampant abuses of this industry in the states where payday is legal.”

Advocates expressed concern that the payday loan industry will disingenuously misrepresent the rule as being an endorsement of their products in an attempt to legalize loans here in North Carolina and other states where payday loans are prohibited.

The new CFPB rule covers short-term loans such as payday and car title loans, as well as long term loans such as installment loans. Payday and car title loans are not legal under North Carolina law, but consumer finance installment loans are legally made in in the state and are often criticized by consumer advocates for predatory elements.

“It is important to be absolutely clear that North Carolina is better off without payday and car title lending regardless of whatever rule the CFPB adopts,” Ripley said. “Since the rule does not preempt state law, North Carolina will continue to benefit from our laws that effectively ban payday lending, but we are concerned that the rule will not effectively rein in all the abuses of the payday and other small loan lending industries that occur in other states. The rule will also not adequately address the abuses we see in consumer finance loans that are made in North Carolina.”

Ripley urged the CFPB to issue a strong final rule that bolsters – not undermines – North Carolina’s protections, including requiring an ability-to-repay assessment across the board and declaring any violation of North Carolina’s usury and other consumer protection laws an unfair, deceptive, and abusive act or practice.

The public may comment regarding the proposed rule until September 14, 2016, after which the CFPB will issue the final rule.

Read this column from American Banker for additional background.

FOR MORE INFORMATION CONTACT: Al Ripley,, 919.856.2573; Julia Hawes,, 919.863.2406.