CHN: Consumer Financial Protection Bureau Proposes Repealing Payday Lending Rule
In a blow to consumers and especially low-income consumers of color, Consumer Financial Protection Bureau Director Kathy Kraninger has proposed repealing the bureau’s payday and car title lending rule before it goes into effect. The rule requires lenders to verify a borrower’s income, outstanding debts, and minimum basic needs in order to determine a borrower’s ability to repay a loan before one is made. The rule was finalized by the CFPB in 2017 after five years of research and input, including nearly half a million comments calling for protections that stop payday and car title lenders from trapping consumers in a cycle of debt.
Compliance with the payday lending rule was to begin in August 2019. While its repeal proposal is pending, the CFPB is also proposing to delay the compliance date for the rule from August 2019 to November 2020. Advocacy groups are urging the submission of comments to the CFPB by March 18, 2019 for the proposed compliance date delay and by May 15, 2019 for the proposed repeal of the rule.
The payday lending rule has been under attack by some since its inception. In January 2018, the CFPB’s former Acting Director Mick Mulvaney announced that the Bureau would reconsider the rule, and that payday lenders might obtain a waiver from the rule while the rulemaking process was reconsidered. In March 2018, some members of the House introduced legislation to repeal the payday rule under the Congressional Review Act (CRA); however, Congress failed to act on this legislation before the deadline for doing so expired.
In seeking to overturn the rule, the Trump appointees disputed CFPB’s extensive research showing typical interest rates of close to 400 percent and with four out of five borrowers needing to take out multiple loans because they could not afford to repay the original one. A February 25 Washington Post story showed that some research used by the Trump appointees to justify overturning the rule was paid for by the payday loan industry.