Customer complaints over pay day loan practices show a need for stronger consumer protections, according to a Colorado consumer advocacy group that reviewed complaints filed with the federal government.
The Colorado Public Interest Research Group found that nearly all complaints filed against pay day lenders have to do with affordability -- or lack thereof. Among the complaints: abusive debt collection practices and loan interest often costing as much as the principal. This often leads to a vicious lending cycle that people have a hard time getting out of, said Danny Katz, CoPIRG’s director.
“They find that the loan that they took out was unaffordable and often times they have to take out another loan, and then another loan, and another loan. And they get into this debt cycle,” he said.
Katz supports new regulations that are being proposed by the Consumer Financial Protection Bureau that would require pay day lenders to ensure that customers can afford the loans. The pay day lending industry says they’re already regulated at the state level – and that the rules would hurt people who have nowhere else to get loans.
The bureau is taking public comment on the proposal through Oct. 7.
CoPIRG said about 10,000 pay day loan consumer complaints have been filed in its database in less than three years, and that more than half of those complaints were about 15 companies.