RELEASE: How Predatory Debt Traps Harm Economically Insecure Families

Washington, D.C. — As public comments close on a proposed rule from the Consumer Financial Protection Bureau, or CFPB, to regulate payday and auto title loans, the Center for American Progress looks at why working families may turn to these high-interest credit options to stay financially afloat. In a new issue brief, CAP outlines how predatory debt traps threaten vulnerable families and offers recommendations for the CFPB to strengthen regulation of this industry.

Over the past three decades, the growth of predatory lending practices has resulted in devastating consequences for the millions of families who have turned to payday and auto title loans to help make ends meet. As wages stagnated and household wealth decreased, greater availability of this risky borrowing created a ripple effect that spurred greater reliance on an already underfunded social safety net, presented challenges to people’s physical mobility if their cars were repossessed, and contributed to greater conflict and stress in the home for the borrowers.

“A loan of a few hundred dollars should not lead to insurmountable debt,” said Joe Valenti, Director of Consumer Finance at CAP. “By tackling predatory credit practices head-on, the CFPB is playing an important role in ensuring that all families can thrive free of the threat of financial ruin from small but often chronic financial shortfalls.”

While the CFPB’s efforts are significant, it cannot act alone. Fully addressing the economic insecurity of struggling families and reversing the rise of predatory lending and their subsequent debt traps requires comprehensive changes to the economy and the nation’s social safety net. Adequately addressing the problem demands an increase in wages and improved safety net programs that truly meet the needs of struggling families, including parents with young children.

Read the full issue brief, How Predatory Debt Traps Threaten Vulnerable Families, by Joe Valenti and Eliza Schultz.

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For more information on this topic or to speak with an expert, contact Liz Bartolomeo at or 202.481.8151.