During a Senate committee hearing Wednesday afternoon, Sen. Ron Wyden, D-Ore., pressed a top official from the Consumer Financial Protection Bureau on what can be done to address abuses by installment lenders. Like Payday lenders, installment loan companies often trap borrowers in a cycle of debt, charging effective annual rates that can exceed 200 percent. Wyden pointed to ProPublica’s story from May that focused on one of America’s largest installment lenders, World Finance:
Our investigation – published together with our partner, Marketplace – found that lenders such as World often load their loans with insurance products that can double their cost. They also profit by persuading borrowers to use the product like a credit card, renewing loans over and over, leading to ballooning extra fees and interest. World boasts more than 800,000 customers, while the broader installment loan industry claims more than 10 million.
“So what can be done about World Acceptance?” asked Wyden, referring to the company’s corporate name. “Is there anything else that you need to do, that Congress needs to do, that regulators need to do?”
David Silberman, the CFPB’s associate director for research, markets, and regulations, gave the same answer the CFPB gave us when we first published our story: The CFPB has broad authority to crack down on non-bank lenders like World for breaking broad consumer protection laws, but the bureau does not yet conduct regular examinations of installment lenders such as World – though it could in the future.
Silberman declined to say whether any particular company was or was not being investigated. Wyden pressed for more information in writing, and Silberman promised to provide it within a couple weeks.
The hearing was held by the Senate Special Committee on Aging and focused on how payday and other high-cost loans impact seniors.