Ventures
  • Our Approach
    • MEET THE TEAM
    • Employment
    • Contact
  • Our Work
    • Familias Con Mas >
      • Alas
      • Workshop & Coaching
    • Futuro
    • Semillitas
    • UndocuFund Monterey Bay
  • Our Reports
    • A Santa Cruz Like Me
    • Assets and Access Dashboards
    • Business Conversion Guide
    • Business Succession to Employee Ownership
    • Family Plan Workplan
    • Financial Capability Snapshot
    • Mamas Con Mas
    • SMALL BUSINESS CLOSURE CRISIS
  • WAYS TO GIVE
    • ONLINE DONATION
    • PLANNED GIVING
  • Español
  • Our Approach
    • MEET THE TEAM
    • Employment
    • Contact
  • Our Work
    • Familias Con Mas >
      • Alas
      • Workshop & Coaching
    • Futuro
    • Semillitas
    • UndocuFund Monterey Bay
  • Our Reports
    • A Santa Cruz Like Me
    • Assets and Access Dashboards
    • Business Conversion Guide
    • Business Succession to Employee Ownership
    • Family Plan Workplan
    • Financial Capability Snapshot
    • Mamas Con Mas
    • SMALL BUSINESS CLOSURE CRISIS
  • WAYS TO GIVE
    • ONLINE DONATION
    • PLANNED GIVING
  • Español

Removing Consumer Protections for the Vulnerable

3/18/2019

0 Comments

 
By Brando Sencion 
 
​The Consumer Financial Protection Bureau (CFPB) recently decided to remove rules that protected vulnerable borrows from accruing ballooning debt that can be created by payday loans. The last set rules released in 2017 aimed to protect consumers from unfair lending practices of the payday lending industry. The original rule required that lenders determine whether a borrower could actually afford to pay back a loan before offering them one. The news rules aim to remove these protections and allow payday lenders to operate freely. 

Payday lenders typically offer small loans to borrowers who promise to pay the loan back by their next paycheck. However, interest on one of these loans can have an annual percentage rate of up to 390 percent or more. In California, the maximum fee a payday lender can charge is 15 percent of the face amount of the check. But that 15 percent fee is equivalent to an annual percentage rate of 460 percent! 

The other issue with payday loans is that they are structured to force people to take out additional loans when they cannot pay their previous loan. Research by CFPB estimates that 80 percent of loans are rolled over, and half of borrowers end up taking out ten or more loans in a year. Consumers fall into a cycle of debt that is difficult to escape because of the payday lending structure.  

However, some states are fighting back payday loan businesses and protecting their consumers. Voters in Colorado last November approved Proposition 111, Limits on Payday Loan Charges Initiative. The proposition reduces the annual interest rate on a payday loan to yearly rate of 36 percent and eliminates all other finance charges and fees associated with payday lending. 77 percent of voters supported the initiative, to end an average APR of 129 percent on payday loans in Colorado.  

As rules and policies for the payday lending industry change, it is important to educate ourselves as consumers. But as community leaders it is important to inform our communities of these changes to prevent families from falling into a cycle of debt. Mamás con Más a project with the UC Santa Cruz Blum Center and SCCV examined mothers’ experiences with financial providers, and mapped the location of alternative and traditional financial services, showing the disproportionate concentration of alternative financial services such as payday loans, check cashing, money transfer services and more, in Watsonville, CA compared to Santa Cruz, CA. ​ 

Building from Mamás con Más, the project recommended to limit alternative lenders such as payday loans in Watsonville and Santa Cruz County, due to high interest rates and fees, which push families deeper into debt. And develop policies that ban or restrict the number of alternative financial services and limit the allowable interest charged. Restricting the number of predatory lending businesses in the City of Watsonville would benefit the community. And not allowing new payday lending businesses to open until a current business closes would be beneficial.   
0 Comments



Leave a Reply.

    Archives

    March 2023
    September 2022
    April 2022
    June 2021
    October 2020
    February 2020
    October 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    September 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    May 2017
    November 2016
    October 2016
    April 2016
    March 2016

    Categories

    All

    RSS Feed

About Us

Our Approach
Our Work
Our Reports

Contact

[email protected]
831.200.1719

Privacy Policy
​A 501c3 Tax Exempt Nonprofit
© COPYRIGHT 2015. ALL RIGHTS RESERVED.