Stop the Debt Trap, a broad coalition of groups and individuals “dedicated to ending the abuses of payday lending,” has introduced a new online instrument. The “Payday Loan Debt Trap Tracker” provides a visual presentation of the damage done to American consumers from short term loans. To put it quickly into perspective, Stop the Debt Trap reports that debt from payday loans “drains consumers of almost $6.4 billion in fees annually, or $213 per second.”
In general this is how it works. Payday lenders loan out money at exorbitant interest rates (300 percent of the annual percentage rate or more). The average repayment period is two weeks. Most borrowers are unable to repay the debt in that time frame without falling behind on other payments. They are then forced to borrow more money to pay off prior loans, creating a vicious circle.
The “Payday Loan Debt Trap Tracker” aims to show people exactly what the repercussions look like for ordinary consumers.
“This debt trap tracker gives us a valuable glimpse into how much money payday lenders’ debt trap strips away from some of the most financially vulnerable Americans,” said Rebecca Borné, senior policy counsel at the Center for Responsible Lending. “These loans consistently put consumers in a worse position than before they took out a loan. This tracker should serve as a wake up call for the Consumer Financial Protection Bureau (CFPB) to live up to its name and implement the payday rule, as originally written, without delay.”
Far from addressing the debt trap created by payday loaners, the CFPB is actively making the problem worse. For example, “The current director of the Consumer Financial Protection Bureau (CFPB), Kathy Kraninger, has proposed gutting the CFPB’s consumer protections for payday loans, and stopped the rules (finalized in 2017 under the prior leadership) from taking effect today.” Moreover:
“In February, the CFPB proposed to delay and to rescind crucial parts of the 2017 final rule on payday lending, including the ability-to-repay provision that generally required that a lender verify a borrower could pay back the loan before it is issued. In June, the CFPB announced they would delay the original compliance date of August 19, 2019 by 15 months.”
Stop the Debt Trap is determined to shed as much light on this out-of-control issue as possible; the “Payday Loan Debt Trap Tracker” is its latest effort to that end.