NCLR Praises CFPB Rule to Curb Predatory Payday Lending Practices

Rule is a good first step, but more needs to be done to close loopholes

June 2, 2016

Julian Teixeira
(202) 776-1812

WASHINGTON, D.C.—Today, NCLR (National Council of La Raza) applauded the release of a proposed rule from the Consumer Financial Protection Bureau (CFPB) to regulate the payday lending industry. The industry has a history of pushing out unsafe financial products that trap many hardworking Americans, including Latinos, in a debt cycle, and this proposed rule is welcome relief for many consumers who live paycheck-to-paycheck. However, NCLR also urges the CFPB to close several loopholes that still allow some of the worst payday lending practices to continue.

“For individuals who are struggling to make ends meet, options for safe and affordable financial products, especially in the form of small-dollar credit (microloans) are often limited. Payday loans might sound like a good option, but they are intentionally structured to keep borrowers in a cycle of borrowing and debt that causes millions of hardworking Americans extreme financial difficulty,” said Janet Murguía, NCLR President and CEO.

“And until today, this market had gone unregulated,” Murguía added. “NCLR supports the Consumer Financial Protection Bureau’s proposed rule to curb the payday loan debt trap, which has ensnared many in our community with the promise of short-term financial assistance. Yet we recognize that there is still more work to be done to ensure that the CFPB rule protects the most vulnerable consumers from these predatory payday, car title and long-term installment loans.”

According to recent numbers, the typical payday loan carries an exorbitant 391% annual percentage rate (APR) and is given to borrowers without consideration of their ability to pay back such a loan. Communities of color, including Latinos, are heavily targeted by both storefront and online payday lenders. Studies have found that race and ethnicity are the leading factors in determining payday loan locations, with high concentrations in lower-income and largely minority communities. This targeting, coupled with the high percentage of communities of color that do not have access to traditional banks, creates a financially stressful combination where vulnerable borrowers have few options.

NCLR had long advocated for national standards to help protect consumers from predatory lending practices, a goal that is shared by many local Latino leaders. Over the past few years, NCLR Affiliates have collected Latino payday borrower stories that show the harm that Americans face due to a lack of consumer protections in the payday lending market. NCLR’s weekly blog series, “Truth in Payday Lending,” highlights nearly a dozen of these stories from borrowers in California, Florida, Idaho, Missouri, and Ohio. NCLR also has resources in English and Spanish for borrowers who are considering a payday loan or are trying to figure out how to get out of a cycle of debt. The NCLR website has contact information for financial counselors that are part of the NCLR Affiliate Network, a list of alternative products and services for small-dollar credit, as well as explainer videos that outline the problems with payday loans and how to get involved in NCLR’s CFPB rule campaign.

While NCLR is pleased that the CFPB rule is rooted in the principle that lending should be done based on the borrower’s ability to repay the loan, protections against loan flipping in the proposed rule must be strengthened. The crucial “ability-to-repay” standard is undermined by flaws in how it is applied, exempting some loans from the ability-to-repay requirement altogether. To prevent harm from unaffordable loans, there cannot be exemptions.

Over the next 90 days, NCLR will be working to ensure the rule is responsive to the needs of the Latino community, and that it truly puts an end to the debt trap that has allowed this industry to profit off of the financial vulnerability of consumers. To ensure that these loopholes in the new rule are addressed, please submit your comments at

NCLR—the largest national Hispanic civil rights and advocacy organization in the United States—works to improve opportunities for Hispanic Americans. For more information on NCLR, please visit or follow along on Facebook and Twitter.