AUSTIN, Texas, June 2, 2016 /PRNewswire/ -- Self Lender, Inc., a fintech startup and leading provider of credit builder loans for low-to-mid income consumers, commends the Consumer Financial Protection Bureau's proposed rules to curb predatory lending practices.
"We are in full support of the CFPB's announcement and commend them on this notable step," said Self Lender co-founder and chief executive officer, James Garvey. "These predatory lending practices target those with the most need and set them up to fail."
"So often, people are forced into a situation to get a payday loan in order to survive between paychecks, and the payday lenders know the consumers will not be able to pay back the loan."
"And when they can't pay – their credit score gets lower and lower, limiting their chances of ever getting help from traditional financial institutions. They're essentially trapped in quicksand," said Garvey.
While banks are already prohibited from these types of loans, payday lenders are thriving in various states. The CFPB's proposed rules would strengthen consumer protection by, "requiring lenders to take steps to make sure consumers have the ability to repay their loans." The proposed rules would also stop debit attempts that hit overdue borrowers with added fees and often lead to forcibly closed bank accounts.
"Many people believe that payday loans can be a lifesaver for those in short-term jams," said Garvey. "But in reality, they lead to much worse long-term problems through continuous borrowing with ridiculously high interest rates."
The announcement of these rules has been long anticipated after a 2014 CFPB study found that over 80% of all payday loans — often due within two weeks and carrying an annual interest rate of over 300% — are rolled over or followed by another loan within 14 days.
"If a person is unable to make a payment towards their payday loan, they are pushed down even further. Defaulted loans end up negatively impacting the person's credit score; it's a vicious cycle," said Garvey. "With poor credit, a consumer is much more likely to see higher interest rates on mainstream financial products such as credit cards, mortgages and auto loans."
"Consumers who rely on payday lenders are not going to like these rules at first," said Garvey. "However, this is an important step for the long-term stability of the American consumer."
The CFPB's proposed rules will cover payday loans, auto title loans, deposit advance products, and certain high-cost installment and open-end loans. The CFPB will also be investigating additional products and practices that may put those facing cash shortfalls at risk.
Garvey created Self Lender, the first fully-online provider of credit builder loans, when he discovered that an eye-opening one in five U.S. adults do not have a credit score and over half of U.S. adults have subprime credit scores. Self Lender aims to make establishing credit history more understandable, accessible and affordable.
"The majority of U.S. adults aren't able to take advantage of low interest rates if they need to borrow money," said Garvey. "Poor credit history can cost a person tens, if not hundreds of thousands of dollars in interest and fees over a lifetime."
"We need to stop punishing those who need help. The CFPB's recent proposal to stop predatory payday lending is a huge step in the right direction to end malicious lending practices. It is imperative to teach young people, and thin-filed consumers the importance of being financially responsible. We can do this by stressing the importance of savings and strong credit history, which enables consumers to make more educated decisions when it comes to their borrowing practices."
About Self Lender
Officially offered to the public in February 2016, Self Lender provides credit-builder loan to Americans who are new-to-credit or are thin-filed. Co-founded by CEO James Garvey and Anthony DiChiara, Self Lender gives consumers the tools and knowledge to establish credit history in a safe and responsible way. Self Lender is a venture-funded financial technology startup backed by Silverton Partners, Kickstart Seed Fund, Techstars, and Galvanize Ventures. For more information, please visit www.selflender.com.
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SOURCE Self Lender, Inc.