WASHINGTON, D.C. –Today, Mick Mulvaney announced that the Consumer Financial Protection Bureau (CFPB) plans to move forward with gutting the agency’s rule to stop abusive payday lending and car-title loan debt traps. The announcement calls for the CFPB to reconsider both the rule's compliance date, as well as its core ability-to-repay provisions. A new proposal is expected in January 2019.
The payday lending rule, finalized last year under then-CFPB Director Richard Cordray, establishes basic consumer protections on these 300% or more interest loans, including the common-sense standard that lenders should have to verify a borrower’s ability to repay before making the loan. The rule was the culmination of five and a half years of CFPB research and stakeholder engagement, as shown in this interactive timeline. The rule, as released in October 2017, is set to go into effect summer 2019.
Center for Responsible Lending Senior Policy Counsel Rebecca Borné released the following statement:
Americans can’t catch a break with Mulvaney at the helm of the CFPB. This is nothing more than his keeping his promise to predatory lenders to sabotage the payday lending rule. If predatory lenders and Mulvaney succeed in eliminating or watering down this important consumer protection, millions of financially distressed Americans will continue to be caught in a crippling cycle of 300 percent-interest rate loans.
This predatory lending business model relies on a borrower’s inability to repay their loans, which leads to a long-term cycle of very high-cost debt. This in turn often causes a downward spiral of bank penalty fees, defaulting on other bills, and even bankruptcy. These predatory loans especially harm communities of color, where payday lenders disproportionately locate their storefronts.
The CFPB payday lending rule should be implemented as finalized, without interruption. A delay is unjustified, and every additional day without the rule will permit lenders to trap more borrowers in the high-cost debt traps the rule is designed to prevent.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at firstname.lastname@example.org.