CFPB Report Outlines Actions Taken Against Payday Loan Industry Under Mulvaney

Inside Subprime: Oct 1, 2018


By Nikolas Wright

The Consumer Financial Protection Bureau released its summer 2018 supervisory highlights report this month, the bureau’s first report under acting Director Mick Mulvaney. These reports outline actions the CFPB takes to ensure payday loan and auto title loan providers and companies issuing consumer credit products comply with federal law.

The report confirms what many have suspected: under Mulvaney, the CFPB’s the Bureau’s supervisory activities haven’t changed much.

Covering the Bureau’s activity from December 2017 to May 201, the report did include one major remedial action against a payday lender, which we reported in July:

A judge ordered a payday loan firm operating in Alabama, Mississippi, and South Carolina to pay back customers $1,522,298 in undisclosed finance charges associated with its auto title loans in Mississippi.

The CFPB also found that the firm used advertisements that misrepresented the annual percentage rate and other information required by the Truth in Lending Act, the 1968 law ensuring lenders accurately disclose costs to consumers. However, because the firm couldn’t pay the $1.5 million, the CFPB settled for a reduced amount of $500,000.

The Bureau identified these deceptive acts among payday lenders:

  • Misleading collection letters: One or more payday lenders sent letters to consumers threatening to repossess their vehicles if borrowers fail to make payments. The CFPB found that lenders said this “despite the fact that these entities did not have business relationships with any party to repossess vehicles and, as a general matter, did not repossess vehicles.”
  • Debiting consumers’ accounts without valid authorization by using account information previously provided for other purposes. For example, a lender would try to collect an entire loan using a borrower’s debit card number or Automated Clearing House (ACH) credentials, which the borrower originally authorized for another purpose, like obtaining the loan.

Government Executive, a publication covering government business news, wrote that the report included only two enforcement actions, compared with six in the report released under previous CFPB Director Richard Cordray.

Bartlett Naylor, a financial policy advocate for Public Citizen, told Government Executive that the report “adds to the chilling narrative that Mulvaney is disarming the nation’s consumer protection agency.”

The Bureau’s trend of taking a softened, “look, no hands” approach to regulating the payday lending industry is troubling for consumers. Just last month, the New York Times reported that Mulvaney wants to scale back routine supervision of creditors for violations of the Military Lending Act (MLA).


Learn more about the dangers of payday loans in the United States in all of our Subprime Reports.