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From Banking and Finance Law Daily, November 7, 2013

CFPB sets sights on payday lenders, welcomes consumer complaints

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau announced that it has now begun accepting consumer complaints about payday loans. In addition to opening its complaint database for payday loans, the bureau has put out a call on its blog for consumers to submit complaints beginning Nov. 6, 2013. The bureau also directed a blog post toward servicemembers and their families, urging them to come forward with payday lending complaints they may have.

Payday loans, also known as “cash advances” or “check loans” often are short-term, small dollar loans, generally for $500 or less, the bureau explained. “Before the Consumer Bureau, consumers who had trouble with payday lending products had few places to turn,” CFPB director Richard Cordray said. “By accepting consumer complaints about payday loans, we will be giving people a greater voice in this market.”

The bureau noted that payday lenders have “sprung up across the country” in the last 20 years. These loans began in storefront locations, but many payday loans now are offered through the Internet.

The CFPB has authority under the Dodd-Frank Act to oversee the payday loan market and began its supervision of payday lenders in January 2012. The bureau studied the payday lending market and released a report on payday loans on April 24, 2013, that outlined its findings. The report found that payday products can lead to a cycle of indebtedness for many consumers.

Submission of complaints. The bureau informed consumers that they can submit a complaint about:

  • unexpected fees or interest;
  • unauthorized or incorrect charges to a bank account;
  • payments not being credited to a loan;
  • problems contacting the lender;
  • receiving a loan for which there was no application; and
  • not receiving money after applying for a loan.

The bureau requests that companies respond to complaints within 15 days and describe the steps they have taken or plan to take. The CFPB expects companies to resolve “all but the most complicated” complaints within 60 days. Consumers are given a tracking number after submitting a complaint and can check the status of their complaint by logging on to the CFPB website.

Military families. In a related blog post, the CFPB advises military families on payday loans and the submission of claims about those loans. In a post by Holly Petraeus, of the CFPB’s Office of Servicemember Affairs, the bureau reminds consumers that if they are servicemembers on active duty, the servicemember, spouse, and certain dependents have the protection of the Military Lending Act (MLA). The MLA says that covered persons cannot be charged an annual percentage rate higher than 36 percent on certain types of consumer loans, including certain payday loans as well as auto title loans and tax-refund anticipation loans.

The MLA provides protections to servicemembers that the average citizen doesn’t have when it comes to payday loans. The CFPB is one of several federal agencies that can enforce the MLA, Petraeus said. “But your complaints are key to helping us enforce it and other consumer financial laws.”

MainStory: TopStory CFPB DoddFrankAct Loans

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