Payday Rule Pullback is Another Example of CFPB Deregulation

The Consumer Financial Protection Bureau (CFPB) made the following announcement yesterday regarding its Payday Rule:

“January 16, 2018 is the effective date of the Bureau of Consumer Financial Protection’s final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (“Payday Rule”).  The Bureau intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule.  

Although most provisions of the Payday Rule do not require compliance until August 19, 2019, the effective date marks codification of the Payday Rule in the Code of Federal Regulations.  Today’s effective date also establishes April 16, 2018, as the deadline to submit an application for preliminary approval to become a registered information system (“RIS”) under the Payday Rule. However, the Bureau may waive this deadline pursuant to 12 C.F.R. 1041.11(c)(3)(iii). Recognizing that this preliminary application deadline might cause some entities to engage in work in preparing an application to become a RIS, the Bureau will entertain waiver requests from any potential applicant.”

This is the latest example of the deregulatory direction being taken by Acting Director Mulvaney, who was appointed by President Trump last November. Other examples include:

• Announced new staff additions -- several of them on loan from Mulvaney's other place of work, the Office of Management and Budget.
• Abandoned the planned consumer debt collection disclosure survey.
• Announced that the Bureau does not intend to assess penalties for errors in data collected in 2018, and plans to reconsider aspects of the Mortgage Data Rule.
• Hired new Chief of Staff, the former Staff Director of the House Financial Services Committee under Rep. Jeb Hensarling (R-TX). Hensarling famously opposes the concept of the CFPB.
• Updated the stated mission of the Bureau.

At the other end of Pennsylvania Avenue, late last year a group of House Members initiated legislation that would use the Congressional Review Act to kill the Payday rule.

The Competitive Enterprise Institute, a conservative think tank, issued this statement in support of that legislation:

“Millions of Americans will have few other options to cover urgent expenses like rent, a car payment, or a medical emergency if regulators succeed in shutting off access to small dollar loans,” said Daniel Press, CEI policy analyst and author of the report, How the Consumer Financial Protection Bureau's Payday Loan Rule Hurts the Working Poor. “Congress has an opportunity now to help consumers by stopping the pay day loan rule from going into effect.”

Consumer advocates are furious that Congress and the CFPB might be able to undo their years of work to create the Payday Rule. In an editorial published by The Herald Sun (North Carolina), Jennifer Copeland, executive director of the N.C. Council of Churches and Larry Hall, secretary of the N.C. Department of Military and Veterans Affairs, explain their support for the rule:

"The (Payday) rule was finalized only after a coalition of over 750 civil rights, consumer, labor, faith, veterans, seniors and community organizations from all 50 states energized a years-long effort to push the Consumer Bureau for these protections from predatory payday and car title lending. The North Carolina Coalition for Responsible Lending was active in that fight, supporting a strong rule from the Consumer Bureau that would not undermine strong state consumer protections, like North Carolina’s 30 percent interest rate cap for consumer loans.

...This legislation, introduced by Rep. Dennis Ross (R-Fla.) and co-sponsored by Rep. Alcee Hastings (D-Fla.), Tom Graves (R-Ga.), Henry Cuellar (D-Texas), Steve Stivers (R-Ohio), and Collin Peterson (D-Minn.), would kill the first ever national payday rule that requires payday and car-title lenders to make a loan only after they have determined that the borrower can afford to pay it back. It is a commonsense measure designed to protect people from being trapped for months and sometimes years in triple-digit payday and car title loans. Congress should leave it alone."