CHN: One Win and One Loss for Consumer Protections

In another blow to consumers and consumer protection groups, the House on May 8 voted (234-175) to repeal a 2013 measure issued by the Consumer Financial Protection Bureau (CFPB) aimed at preventing racial discrimination in auto lending. The Senate had previously voted (51-47; 51 votes needed for passage) to repeal the measure on April 18, and President Trump signed the legislation on May 21. The chambers voted to repeal the measure, known as a guidance document, under the Congressional Review Act (CRA); many advocacy groups considered this a troubling overreach of the CRA’s use. Under the intent of the CRA, Congress has 60 legislative days to review and override certain new regulations issued by federal agencies, with only a simple majority vote in the Senate and House, as well as presidential approval. However, in this case, lawmakers used the CRA to target a guidance document that has been in place for years, using a loophole that could allow Congress to overturn regulatory protections and safeguards that have been in place for decades if such documents weren’t submitted to Congress as formal rules. CHN joined Public Citizen and more than 60 other organizations in urging Congress to vote against this repeal. Use of the CRA also prevents agencies from enacting similar regulations again in the future unless specifically authorized by a subsequent law.

Advocates breathed a sign of relief, however, when Congress failed to use the CRA to repeal the CFPB’s payday lending rule before the deadline for action expired on May 16. The payday lending 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, 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. CHN is a member of the Stop the Debt Trap coalition, and has participated in efforts to defend the payday lending rule. The threat is not over, however, as a court challenge to the rule remains pending. Acting CFPB Director Mick Mulvaney has indicated that he will re-open the rule for further consideration, 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. For more information, see CHN’s blog, the March 5 Human Needs Report, and this press release from Americans for Financial Reform.

consumer protection
payday lending