The Consumer Financial Protection Bureau has expanded its consumer complaint database to include problems with payday loans. The CFPB is the first federal agency with the regulatory authority to supervise this industry.
"Before the Consumer Bureau, consumers who had trouble with payday lending products had few places to turn," said CFPB Director Richard Cordray in a statement. "By accepting consumer complaints about payday loans, we will be giving people a greater voice in this market."
The CFPB said it will accept complaints from customers about:
The CFPB also wants to hear from people who received a loan they did not apply for. This can happen when the lender mishandles personal information, such as a bank account number or Social Security number.
"We are thrilled that the CFPB is accepting complaints about payday lenders," said Lauren Saunders, an attorney with the National Consumer Law Center. "Payday lending is one of the most abusive forms of lending out there. It's about time somebody took a close look at them."
The Community Financial Services Association of America (CFSA), which represents payday lenders, also praised the announcement.
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"CFSA strongly supports the CFPB's effort to address illegal or unethical lending practices, and we believe the newly launched complaint portal will help both regulators and consumers identify bad actors in the marketplace," the trade group said in a statement. "In advance of the portal launch, many of our members voluntarily signed up to take part in the process by which they will work through the CFPB to quickly handle and resolve a complaint with a customer."
An industry under attack
Payday loans are big business. About 12 million Americans use a payday loan service each year, according to a report last month by Pew Charitable Trusts. These small, short-term loans are generally less than $500. It's a way for someone without credit to get a loan. But it often comes at a high cost.
With most payday loans, borrowers must repay the loan the next time they get paid. And they're typically required to give the lender access to their checking account to repay that loan.
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The Pew researchers found that most payday loan customers cannot make the full payment when it's due, so they take out a new loan every two weeks. This can go on for months. The end result: The average borrower spends $520 in interest to pay for a $375 loan.
The industry insists that it provides "a valuable service" to customers who want and need these loans.
"Our customers have done the math, and they choose the payday loan because it's the least expensive option for them," Amy Cantu, communications director for CFSA.
Or is it?
In a report issued earlier this year, the CFPB concluded that "some consumers may misunderstand the costs and risks," particularly those associated with repeated borrowing.
"We all agree that people should have access to help when they're struggling, but payday loans are not helping," said Nick Bourke, director of Pew's Safe Small Dollar Loans Research Project. "By taking one-third of the borrower's next paycheck, payday loans just make it more difficult to make ends meet."
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Based on its research, Pew has called for more regulation of this marketplace to make such loans safer and more affordable.
How to complain
Complaints can be filed online, by phone (toll-free at 1-855-411-2372 or TTY/TDD at 1-855-729- 2372), by fax (1-855-237-2392) or by mail (CFPB, P.O. Box 4503, Iowa City, Iowa 52244).
Each complaint is forwarded to the company, which is asked to respond within 15 days about the action it has taken or plans to take. The complaint and response are posted in its public database. The CFPB expects to close all but the most complicated cases within 60 days.
The bureau accepts complaints about mortgages, credit cards, student loans, auto loans, money transfer services, credit reports and debt collection.
You can get clear, unbiased answers about payday loans through AskCFPB or by calling the CFPB toll-free at 1-855-411-2372.