Consumer protections from payday lenders survive – for now


May 18, 2018

The Trump Administration, payday lenders, and their allies in Congress have been working for some time now to roll back protections designed by the Consumer Financial Protection Bureau (CFPB) to restrict the predatory practice of payday lending.

Today consumer advocates are celebrating, at least for now. Here’s why: last night, the legislative clock expired when the Senate failed to take action to disapprove CFPB’s protections against payday lending.

The Senate had through May 16 to use the Congressional Review Act (CRA) to wipe out this rule. The CRA is a fast-track legislative tool that allows lawmakers to undo federal regulations years in the making with a simple majority vote in both the House and the Senate (and without public hearings). But since the payday rule was not brought up for a vote during the limited time allotted for a CRA challenge, implementation of the rule will go forward for now, a victory for consumer activists and a defeat for the Trump Administration and the payday lending industry.

CHN is a member of the Stop the Debt Trap coalition, and has participated in efforts to defend the CFPB rule.  Advocates for low- and moderate-income workers understand how dangerous the debt trap is.  Pay-day loans typically charge 400 percent annual interest, and borrowers wind up taking out multiple loans to pay off the first one, piling up thousands of dollars in debt on loans of only a few hundred dollars.

“A coalition of over 1,000 community, consumer, civil rights, labor, faith-based, veteran, and other types of organizations in all fifty states can claim victory today after calling on the CFPB to issue these consumer protections, and congress to support them,” said José Alcoff, Payday Campaign Manager at Americans for Financial Reform, in a news release. “Tens of thousands have stood up to payday lenders who have been preying on their communities, and fought to rein in these debt traps at the state and federal levels. The consumer bureau should now prepare to rigidly enforce these protections to show debt trap lenders that no one is above the law.”

Yana Miles, Senior Legislative Counsel at the Center for Responsible Lending, added, “The consumer bureau should now focus on enforcing this rule as written and defend it against the payday lenders, who are desperately trying to block the rule from moving forward.”

Indeed, now that the payday lenders have had their efforts blocked in Congress, they are pursuing two other avenues – a pending court challenge and action by the Trump Administration to weaken the rule. According to the trade publication American Banker, Acting CFPB Director Mick Mulvaney has indicated that he will re-open the rule for further consideration. “This is likely to be a lengthy process – one bound by notice-and-comment procedures – and one that is likely to be fiercely debated by industry advocates and consumer groups alike,” American Banker reported.

“UnidosUS, our Affiliate network and the Latino community have long supported efforts to curb the abusive lending practices that target our families and threaten their financial stability,” said Marisabel Torres, Senior Policy Analyst at UnidosUS, a CHN member. “The CFPB’s common sense payday rule was the result of tireless advocacy by people who had experienced first-hand the harmful effects of these products. Congress should work to defend and further strengthen consumer protections, instead of giving into the desires of Wall Street. The CFPB must enforce the rule and stand up to the payday industry.”