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One Year After CFPB Issued Payday Rule, Predatory Lenders Still Trying to Block its Implementation

Friday, October 5, 2018
Scott Astrada

Payday Loan Sharks are Allied with New Leadership at the CFPB in Trying to Stop Consumer Safeguards

WASHINGTON, D.C. – Today marks the one-year anniversary of the Consumer Financial Protection Bureau (CFPB) finalizing its rule to stop payday and car-title debt traps. It is the first-ever federal rule of its kind and came after more than five and a half years of development, as shown in this interactive timeline. At the heart of the rule is the common sense and widely-supported principle that lenders check a borrower’s ability to repay before issuing a loan.

The Center for Responsible Lending’s Federal Advocacy Director Scott Astrada issued the following statement:

The CFPB payday rule is badly needed to prevent payday lenders from pulling Americans into a financial freefall of debt, defaults, and despair. In the past year, payday and car-title lenders drained approximately $8 billion in fees from consumers. (PDF)

Payday and car-title loans are a debt trap by design. It is crystal clear in the data. It is also seen by these predatory lenders fighting tooth-and-nail to stop this rule, which simply sets a baseline standard for affordability, from going into effect.

Mick Mulvaney and future leadership at the CFPB should let this basic consumer protection move forward.

Additional Background

Over the past year:

  • Predatory lenders tried but failed to meet a deadline for Congress to rescind the rule and block promulgation in the future of a similar rule through a Congressional Review Act (CRA) resolution.
  • Mick Mulvaney, who has advocated for eliminating the rule through the CRA, has stated that he intends to reopen the rulemaking process and may publish a proposed rule by February 2019 or earlier.
  • The industry, led by the Community Financial Services Association of America and the Consumer Service Alliance of Texas, filed a lawsuit to invalidate the rule and prohibit the CFPB from implementing it.
    • Mick Mulvaney decided to have the CFPB join the industry in its effort to delay the rule indefinitely. The court rejected this particular effort, but the case is still pending.
  • The U.S. Department of the Treasury, in its recent “fintech” report, called for the elimination of the rule.

Facts on payday loans:

  • More than four out of every five payday loans are re-borrowed within a month.
  • Three-quarters of all payday loan fees are from borrowers with more than ten loans in the coarse of a year.

For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Matthew Kravitz at matthew.kravitz@responsiblelending.org or 202-349-1859.