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Threading the Needle on Payday Loan Regulation

To keep credit available while driving down loan prices, the CFPBs regs must be carefully designed and well-balanced.

By Luis Peralta | Updated on August 29, 2016

Credit unions are currently evaluating the first-ever federal regulations for payday loans and auto title loans, proposed in June by the CFPB. Public comments are due Oct. 7. As someone experienced in offering a payday alternative product, I believe the CFPB is right to step in and try to protect consumers, but the regulations need to be carefully designed and well-balanced if they are going to keep credit available while also driving down loan prices. With the right approach, the CFPB can encourage more credit unions to come into the market with lower-cost products of their own.

The CFPB has proposed rules that will give consumers more time to repay in installments, but 300% APR installment loans – which would still proliferate in the market under the rules as now proposed – are harmful too. Congress did not give the CFPB the authority to limit interest rates, so the only way for them to bring down prices is to encourage lower-cost lenders like credit unions to offer better loans.

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