Acting CFPB director seeks to end payday lending protections and Bureau funding
Inside Subprime: January 19, 2018
By Caroline Thompson
The Consumer Financial Protection Bureau has had a tumultuous year. Since the departure of longtime director Richard Cordray, a power struggle between Cordray’s designated successor, Leandra English, and Trump appointee Mick Mulvaney, and a call from CFPB creator Elizabeth Warren for a briefing to investigate what she believes are Mulvaney’s attempts to dismantle the Bureau from the inside, the future of the embattled consumer protection agency is not looking bright.
Warren’s accusations against Mulvaney seem even more relevant this week, after the acting director of the CFPB sent a formal letter to Federal Reserve Chairwoman Janet Yellen requesting a grand total of zero dollars in operating funds for the first quarter of 2018. To put this in perspective, last quarter Cordray requested $217.1 million. Mulvaney claims this move is to benefit taxpayers, and says the Bureau still has enough money in the bank to get through the first quarter without needing additional funds.
“While this approximately $145 million may not make much of a dent in the deficit, the men and women at the Bureau are proud to do their part to be responsible stewards of taxpayer dollars,” Mulvaney wrote in his letter to Yellen.
Additionally, the CFPB issued a short statement on Tuesday announcing that it plans to reconsider its rules for protecting consumers against predatory payday lenders:
“January 16, 2018 is the effective date of the Bureau of Consumer Financial Protection’s final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (“Payday Rule”). The Bureau intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule.”
The Payday Rule, which was enacted last year and is set to go into effect later this year, was designed to curb predatory lending on the part of payday loan businesses. According to NBC News:
“The cornerstone of the rules enacted last year would have been that lenders must determine, before giving a loan, whether a borrower can afford to repay it in full with interest within 30 days. The rules would have also capped the number of loans a person could take out in a certain period of time. If allowed to go into effect, the rule would have had a substantial negative impact on the payday lending industry, where annual interest rates on loans can exceed 300 percent.”
Repeal of this rule would be a win for the payday industry, which has been lobbying against it for months.
Mulvaney’s tumultuous time as acting CFPB director will likely come to an end within the next few months, whether due to lawsuits filed by English hoping to take back the role, or Cordray’s original term coming to an end in July. When the term is up, President Trump will likely appoint someone else as CFPB director. While the White House’s apparent top choice for the role, chair of the National Credit Union Administration J. Mark McWatters, has raised concern among watchdog groups who believe he is too close to the industry he would be regulating, in recent days, Republican lawmaker Jonathan Denver of Ohio has been floated as a possible candidate to lead the Bureau instead.
To read more about the CFPB, check out these related pages and articles:
- Embattled acting CFPB director faces massive internal divisions
- Senator Warren throws her hat in the ring for ongoing CFPB fight
- CFPB and VA warn borrowers against refinancing scams