CSBS Issue Briefings - January 2020

CSBS ISSUE BRIEFING

Talking Points •

Payday loans are the main focus of the CFPB’s rulemaking. Achieving consensus across the states on the topic of payday lending is difficult because legislatures in 15 states and the District of Columbia have set usury rates that do not permit payday lending. However, in 35 other states, the traditional payday loan product is available to consumers subject to stringent licensing and regulatory requirements. These state differences are integral to the fabric of our regulatory system. • Congress recognized the value of state autonomy in protecting consumers while allowing for beneficial innovation in financial markets by intentionally prohibiting the federal government from setting a national usury rate for nonbank financial services providers. • State specific regulatory regimes for small dollar lending illustrate the challenge of forcing a one- size-fits-all federal regulatory framework for the non-depository financial services industry. • Federal rulemaking would set a floor and not a ceiling for consumer protection. State regulators oppose any federal agency action that fails to respect the ability of states to control interest rates and impose additional consumer protections for small-dollar credit products. • Federal rulemaking should be coordinated to avoid creating a race to the bottom amongst federal regulators and an environment in which nonbanks can attempt to circumvent state laws and regulations through contractual relationships with banks.

SME Contact: Daniel Schwartz, Director, Policy Development, (202) 728-5742, DSchwartz@csbs.org

Date Updated: 01/13/2020

FOR STATE REGULATOR USE ONLY