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Payday Lenders, Vehicle Title Loans, and Small-Value Financing: The CFPB's Proposal to Regulate the Fringe Economy

133 Banking Law Journal 263, June 2015

28 Pages Posted: 11 Jun 2015  

Christopher K. Odinet

Southern University Law Center; University of Iowa - College of Law

Date Written: June 9, 2015

Abstract

The market for payday lenders, businesses that provide vehicle title loans, and other small-value financing players is rife with controversy. Some see them as predatory lenders that weave a web of never-ending debt designed to capture the weakest and most economically vulnerable of society. However, advocates of these financial institutions argue that for many Americans who are otherwise shut out of the conventional lending market, these players provide the only viable source of credit in times of economic hardship. Whatever the view, these businesses, their borrowers, and the credit markets that they together comprise are often referred to in legal and economic research and literature as the "fringe economy." And interestingly, aside from a patchwork of state law rules, this area of the financial services sector is fairly unregulated.

However, on Thursday, March 26, 2015 the U.S. Consumer Financial Protection Bureau released a report outlining the agency’s long heralded plans to impose nation-wide regulations on the fringe economy. The first part of this article gives an overview of the fringe economy, the types of services and products it provides, and gives a snapshot of existing, state-based regulations. The second part goes into the nuts and bolts of the proposed rules.

Keywords: banking, fringe economy, consumer protection, lending, financing, predatory lending

Suggested Citation

Odinet, Christopher K., Payday Lenders, Vehicle Title Loans, and Small-Value Financing: The CFPB's Proposal to Regulate the Fringe Economy (June 9, 2015). 133 Banking Law Journal 263, June 2015. Available at SSRN: https://ssrn.com/abstract=2616357 or http://dx.doi.org/10.2139/ssrn.2616357

Christopher K. Odinet (Contact Author)

Southern University Law Center ( email )

P.O. Box 9294
Baton Rouge, LA 70813
United States
225-771-4900 (Phone)

HOME PAGE: http://www.sulc.edu

University of Iowa - College of Law ( email )

Melrose and Byington
Iowa City, IA 52242
United States

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