Payday Lenders Sue Consumer Financial Protection Bureau

An Obama-era regulation, yet to be implemented, would have required pay day lenders to verify that borrowers can afford the debt before giving them money, and capped the number of successive loans an individual can take. Republicans in both houses have introduced legislation to block its implementation, and the pay day loan industry has just filed a lawsuit in the U.S. District Court for the Western District of Texas, alleging that the regulation is “draconian,” would “virtually eliminate” the payday-lending industry, and “was motivated by a deeply paternalistic view that consumers cannot be trusted with the freedom to make their own financial decisions.” About 12 million people take out such loans annually, and spend more than $7 billion on fees. According to the industry, the loans provide a “financial lifeline for millions of consumers who choose these products over other available forms of credit.” Loans typically cost 400 percent annual interest (APR) or more. The finance charge ranges from $15 to $30 to borrow $100.