New resolution may overturn CFPB payday loan rules

Inside Subprime: March 28, 2018

By Caroline Thompson

We’ve done extensive reporting in recent months on the upheaval currently plaguing the Consumer Financial Protection Bureau, and the hits just keep coming. After the departure of the Bureau’s longtime director, President Trump appointed Mick Mulvaney, an outspoken critic of the agency, as acting director. To say it’s been a rough ride since is a bit of an understatement. Since taking office, Mulvaney has effectively rebranded the Bureau – which was initially created to protect consumers from big financial companies through increased regulation – as a champion of deregulation and a friend of the very companies it was designed to keep in check.

The latest development in the long, drawn-out death of the CFPB? The potential demise of one of the Bureau’s last legitimate acts before Mulvaney took the reigns. Back in fall 2017, the CFPB introduced a series of payday lending rules to protect consumers from predatory loans. The rules would, among other things, require lenders to verify whether or not potential borrowers actually had the means to repay their loans within their loan terms, and the payday lending industry has been pushing against these restrictions from the very beginning. While the rule would not go into effect until 2019, several states have already been spurred by payday lending lobbyists, and introduced local legislation to create new categories of loans that would fall outside the rule.

Now, the very future of the rule itself is in question. Last week, U.S. Senator Lindsay Graham introduced a joint resolution under the Congressional Review Act to override the Payday Rule.

According to an article in the Consumer Finance Monitor:

“To be eligible for the special Senate procedure that allows a CRA resolution to be passed with only a simple majority, the Senate must act on the resolution during a period of 60 ‘session days’ which begins on the later of the date when the rule is received by Congress and the date it is published in the Federal Register.  While the deadline for voting on a CRA resolution cannot be definitively determined in advance because of uncertainty as to which days going forward will count as ‘session days,’ it appears the deadline will occur by mid-May.”

The CRA was recently used by Republicans to overturn another CFPB rule, which would have allowed consumers who had been wronged by big banks to band together and sue, effectively voiding any anti-arbitration clauses in the fine print of their contracts. If this rule is also thrown out, consumers with bad credit will continue to be walking targets for predatory lenders, and may end up in a cycle of debt that is difficult – or even impossible – to dig their way out of.

Mulvaney is scheduled to testify before the House Financial Services Committee on April 11, and will likely be asked his thoughts on the demise of the Payday Rule. Something tells us he won’t be too sad to see it die.

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