CFPB report examines ongoing charges for payday loan borrowers


Consumer Financial Protection Bureau (CFPB) officials said an agency report has determined that payday loan borrowers continue to pay significant rollover fees despite available protections and payment plans.

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“Our research suggests that state laws that require payday lenders to offer extended repayment plans at no cost are not working as intended,” CFPB Director Rohit Chopra said. “Payday lenders have a strong incentive to protect their income by inducing borrowers to re-borrow in expensive ways.”

According to the CFPB, while fee-free extended payment plans are established to help borrowers break out of the cycle of rollovers and fees, the payday business model depends on high rollover rates and fees.

The report showed that rollover fees incentivize lenders to keep borrowers ignorant of fee-free extended payment plans — and the CFPB said its industry oversight has determined that some payday lenders tricked borrowers into misrepresenting or by withholding information about payment options.

More than 12 million borrowers get payday loans every year in the 26 states where payday loans aren’t banned. The CFPB said 16 states require payday lenders to offer no-fee extended payment plans, allowing borrowers to repay only the principal and fees already incurred, spreading the remaining balance over several months.

If a borrower defaults on their loan, they have the option of renewing their loan. However, this is a more expensive option because a rollover renews the borrower’s loan for another pay period, and the borrower must pay additional payday loan fees.

The CFPB said it will continue to monitor the payday lending industry, deploying enforcement and oversight authorities where abuses and violations exist.


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