CHN: House Moves Anti-Consumer, Pro-Payday Lender Legislation
In a blow to consumers, some in Congress are moving to repeal the Consumer Financial Protection Bureau’s payday lending rule which 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, put forth by the CFPB after five years of research and input, was put in place to curb the ability of payday and car title lenders to trap consumers in a cycle of debt. But now, some members of the House have introduced H.R. Res 122, legislation to repeal the payday rule under the Congressional Review Act (CRA). Under the CRA, Congress has 60 legislative days to review and override certain new regulations enacted by federal agencies, with only a simple majority vote in the Senate and presidential approval. The CRA also prevents agencies from enacting similar regulations again in the future unless specifically authorized by a subsequent law. As CHN previously reported, the CFPB’s Acting Director Mick Mulvaney (who concurrently serves as the head of the Office of Management and Budget) announced in January that the Bureau would reconsider the payday rule rule, which was crafted under the direction of previous CFPB Director Richard Cordray, and that payday lenders might obtain a waiver from the new rule while the rulemaking process is reconsidered. Reconsidering the rule would take much longer, however, than congressional action. For more information, see the Center for Responsible Lending and the Stop the Debt Trap coalition.
In a related move, the House passed (245-171) a bill on Feb. 14 that would take away states’ rights to cap interest rates on payday loans. This would give a green light to payday lenders to charge huge interest rates to low-income consumers without having to abide by state laws. Consumer advocates warn that state interest rate limits are the most effective protections against the harms of predatory lending. The bill is not expected to move in the Senate in the near future. For more information, see CHN’s recent blog post on this topic.