Predatory Lending

What's New

Several states have taken action to rein in predatory lenders, but not all—and certainly not Congress. Iowa PIRG fights to regulate the industry’s misleading promises and triple-digit interest rates, and to educate consumers on how to protect themselves.

Overview

Predatory lending practices trap some of America’s most vulnerable consumers in spirals of debt. U.S. PIRG is fighting these abusive practices in a number of industries:

Rent-to-Own

The predatory rent-to-own industry promises consumers the American dream of owning products like televisions, refrigerators and even car wheelsets. But their “rentals“ are actually high-interest loans, chiseling unwitting consumers with interest rates of up to 230 percent APR and other charges. Wisconsin, Vermont and Minnesota have acted to protect their residents from rent-to-own outfits with rate disclosure requirements, while New Jersey has capped interest rates at an affordable 30 percent APR. Unfortunately, other states have enacted laws that protect this predatory industry, and an industry-backed bill in the U.S. Senate—S 603, the Consumer Rental Purchase Act (Landrieu, La.)—seeks to preempt, or override, these strong state consumer protections.

Payday Lending

Borrowers at “payday lending“ outfits are often middle- or low-income families who need a small boost to make ends meet. These families think they’re getting a short-term loan, but most will end up with serious, long-term debt. In New Mexico, for instance, where predatory lenders operate freely, the average borrower faces such high interest rates that they have to roll over the loan 6 times on average. A two-week loan turns into a three-month loan, and with interest rates of up to 500 percent, the borrower is quickly paying more in interest than the original amount of the loan.

Several states have taken action to rein in predatory lenders, but not all—and certainly not Congress. U.S. PIRG fights to regulate the industry’s misleading promises and triple-digit interest rates, and to educate consumers on how to protect themselves.

News

Payday Lenders Evade State Consumer Protections By "Renting" Bank Charters

Payday lenders, thwarted by state regulators and the courts, are expanding their use of partnerships with banks to make loans that violate state usury laws, small loan rate caps, and even payday loan state legislation. Read more.

ISSUES