Predatory lenders are lobbying Congress and the CFPB to undermine sensible regulations
Don’t look now but if payday lenders get their way, recent efforts to regulate the payday loan industry could be completely undermined by industry lobbyists and Congress, not to mention Mick Mulvaney, the Acting Director of the Consumer Finance Protection Bureau (CFPB). It’s disgraceful that Congress won’t rein in these financial predators. Working class families and the financially vulnerable simply cannot afford to go back to the days of paying 300% interest rates for a short-term loan.
With the change in Presidential administrations in 2016 came a push to reduce government regulation in all areas of the economy, and the consumer finance industry was no exception. Congressional Republicans and President Trump first set their sights on eliminating the Dodd-Frank Act and then on significantly reducing the power of the CFPB and rolling back some of their most controversial regulations.
All of that is fine—there needed to be less regulation on legitimate financial lending.
Unfortunately, lobbyists for the payday loan industry have been quietly taking advantage of this anti-regulatory fervor by urging policymakers to get rid of one of the CFPB’s crowning achievements announced during the final days of the Obama Administration—tough new rules on the payday loan industry designed to clean up the industry up once and for all.
Everyone’s heard the horror stories about payday lenders. Cash-strapped workers sign up for short-term loans at outrageous interest rates, only to discover that if when they fall behind on their payments, the late charges and additional fees accelerate their interest rate to unheard of levels. As a result, these victims are suddenly caught up in a vicious cycle where they can only pay the interest owed on their loan while their outstanding loan balance continues to grow. Payday lending is “predatory lending” at its worst and it not only wreaks havoc on the economy but it literally destroys families.
By comparison, NPR reported, the CFPB’s new proposed regulations are fairly straightforward and sensible. Payday lenders would be forced to evaluate a customer’s ability to repay their loan within 30 days and underwrite the loan accordingly. In addition, the number of loans that a customer could take out would be capped. What’s not to like?
Last week, Congress balked at an opportunity to eliminate the new CFPB payday loan regulations but lobbyists are already pushing for Congress to take another shot at passing new legislation in 2019. However, this time payday loan lobbyists have a new friend who can potentially help them get their way—the new Acting Director of the CFPB, Mick Mulvaney. Last November, one of the first actions that Mulvaney took as the new Director was to announce that the CFPB would be taking a fresh look at the payday loan regulations with an eye towards streamlining them. We all know what that means.
Frankly, whether you’re a Republican or a Democrat shouldn’t matter when it comes to the issue of regulating the payday loan industry because any industry that can charge its customers interest rates in excess of 300% or higher is essentially unregulated. If there’s one lesson that we’ve all learned from the great recession of 2008, it’s that predatory lending of any kind helps no one, and sooner or later karma catches up with greedy financial companies who gouge their customers. That’s why James B. Nutter & Company has never engaged in subprime lending because we’ve always believed in one simple rule: “If it’s not good for the customer, it’s not good for us.”