Democratic Lawmakers Repeatedly Criticize CFPB Director for Overhaul of Payday Loan Rule
Inside Subprime: April 4, 2019
By Grace Austin
Democratic lawmakers are criticizing the Consumer Financial Protection Bureau director for the agency’s latest moves involving the payday loan industry.
In March 2019, CFPB Director Kathleen Kraninger sat before Congress to speak about controversial decisions by the agency. It’s part of the agency’s required twice-a-year report to Congress. Those decisions included recently overhauling the payday lending rule and ending exams of financial organizations to make sure they’re complying with the Military Lending Act.
The latter move brought scrutiny by several senators on the Banking Committee. Kraninger’s predecessor Mick Mulvaney stopped the compliance exams on financial organizations, which were regular under the Obama administration, and Kraninger hasn’t started them again.
The Democratic senators also criticized the abandonment by the CFPB of the ability to repay provision in the payday loan rule. That would now allow lenders to make loans regardless of a borrower’s capacity to repay them.
Democrats on the Senate Banking Committee also grilled Kraninger on why more enforcement actions haven’t been taken since she took office.
The week before, House leaders questioned Kraninger about the CFPB’s recent actions and her time at the agency.
Kraninger told the House Financial Services Committee, which has a Democratic majority, she was dedicated to protecting American consumers as head of the CFPB. But she told the committee she was “focused on supervision and prevention, rather than on enforcement,” according to American Banker.
House Financial Services Committee Chairwoman Maxine Waters, D-Calif., said, “I’m deeply concerned about the damage they have done” to the CFPB, referencing Republican lawmakers’ efforts to roll back the agency’s powers.
Waters has been vocal about the CFPB’s perceived lack of action protecting consumers. She recently introduced the Consumer First Act, which seeks to better safeguard American consumers.
Prior to the congressional hearings, Waters and 46 other Democratic lawmakers sent a letter to Kraninger, criticizing the proposal to end the ability-to-pay provision of the payday loan rule.
The letter stated, “Repealing this rule provides a green light to the payday loan industry to prey on vulnerable American consumers. In drafting these devastating changes to the Payday Rule, the CFPB is ignoring one of the most fundamental principles of consumer finance – an individual should not be offered a predatory loan they cannot pay back.”
The letter also noted that the underwriting provisions were finalized after years of investigations and research that highlighted the disreputable practices which were rampant in the industry, and that the CFPB has made no new findings available that support the decision to rescind the rule. Should there be a lack of such research, the lawmakers noted, the CFPB may have violated the Administrative Procedure Act.
The lawmakers asked for information on the impact of repealing the rule and any investigations and comments received by the bureau after repealing the rule.