The Consumer Financial Protection Bureau began overseeing the payday loan industry in 2012 and is now accepting complaints from borrowers who experience issues with them.
Consumers who take out payday loans, or cash advances, generally borrow less than $500 for a short period of time. These loans carry high interest rates, and while 12 million Americans use them each year, only 14% can afford to pay the amount in full, and the average borrower ends up in debt for five months, according to data from the Pew Charitable Trusts. That average borrower ends up paying $520 in finance charges for a $375 loan.
Though payday loans can be a helpful tool for consumers with limited or no access to credit, it can also trigger a cycle of debt. A report from the CFPB earlier this year showed that 75% of borrowers rely on the lender to provide information about the loan, and in a news release about the announcement, CFPB Director Richard Cordray highlighted an important issue with this lender-borrower relationship:
“Before the Consumer Bureau, consumers who had trouble with payday lending products had few places to turn,” Cordray said. “By accepting consumer complaints about payday loans, we will be giving people a greater voice in this market.”
Borrowers may find themselves falling further into debt as they try to work out their issues with the lenders, and while some borrowers can enter into an Extended Payment Plan to repay their debt, not everyone has access to such options. Laws concerning payday loans vary from state to state, which can compound consumer confusion.
Consumers can file complaints with the CFPB by filling out an online form, calling the bureau, sending a fax or writing a letter, and the CFPB will accept complaints covering the following issues:
- Unexpected fees or interest
- Unauthorized or incorrect charges to their bank account
- Payments not being credited to their loan
- Problems contacting the lender
- Receiving a loan they did not apply for
- Not receiving money after they applied for a loan
Further details are available on the CFPB’s website.