SVCF urges strong federal payday lending rules at town hall

Public comments on federal payday lending rule can be provided online until Oct. 7

Payday Lending
Payday lending building

When bills are due and your paycheck can’t cover them, what do you do? For some consumers, payday loans provide cash to cover unexpected expenses due to job loss, medical emergencies, car troubles or other special circumstances. Unfortunately for many, payday loans spiral into a debt trap. What may have started as a short-term cash solution quickly becomes a cycle of taking out more loans to repay previous debts. High fees (including annual percentage rates that often exceed 400 percent) and other barriers make the debt cycle impossible for consumers to escape. 

In fact, nearly a third of Californians who have payday loans end up taking out 10 or more payday loans each year, as part of this vicious cycle.

What's more, these payday lending agencies target low-income families and communities of color. In California, payday lenders are 2.4 times more concentrated in communities of color, the Center for Responsible Lending Policy found, even after controlling for income and a variety of other factors. 

New federal rule proposed

At a town hall event in Oakland, Calif., on July 22, local citizens and organizations, including Silicon Valley Community Foundation, shared stories of how the payday loan industry hurts consumers, especially low-income families and communities of color.

Town Hall event
SVCF's Erica Wood, left, spoke in support of strong payday lending rules at a town hall July 22 with Housing and Economic Rights Executive Director Maeve Elise Brown, center, and Consumer Financial Protection Bureau Director Richard Cordray. 

The event featured the U.S. Consumer Financial Protection Bureau (CFPB), which has proposed a rule to rein in predatory lending by requiring providers of small-dollar loans to assess a borrower’s ability to repay before making a loan. The agency is accepting public comments on the proposed rule until Oct. 7, 2016. 

At the town hall, Richard Cordray, director of the CFPB, heard stories of payday lending struggles from community organizations, including the event’s host Housing and Economic Rights Advocates (HERA), a nonprofit that SVCF supports through our economic security grants.

Erica Wood, SVCF’s chief community impact officer, spoke about how we seek to combat predatory lending through our grantmaking, research and partnerships. 

In her comments, Wood urged the agency to implement the strongest possible rules requiring lenders to determine ability to repay before making a loan, and noted the letter SVCF and 57 other community foundations from across the nation submitted to the CFPB in support of payday lending rules. This was the first time community foundations came together to press a regulator to protect working families through its rulemaking powers.

Share your feedback

In the new rule proposed by the CFPB, payday lenders would be required to determine whether borrowers can afford to pay back their loans. According to the CFPB, the rule would also “cut off repeated debit attempts that rack up fees and make it harder for consumers to get out of debt.”

SVCF encourages consumers to provide comments to the CFPB on their experience with payday lending before the Oct. 7 deadline. 

Questions? Please contact our economic security program officer Rafael O. Morales at


Read more about the CFPB’s proposed rule: 

Learn more about payday lending through SVCF’s work and resources: