The Consumer Financial Protection Bureau said on Tuesday that it will reconsider a wide-ranging rule targeting the billions of dollars in fees collected by payday lenders offering high-cost, short-term loans.
The move would be the most stark example yet of the direction the Trump administration plans to take the agency after appointing one of the its longtime critics, Mick Mulvaney, to temporarily take over leadership. During President Barack Obama’s administration, the CFPB spent years working on rules to radically reshape the payday lending industry by requiring firms to verify that borrowers could afford the loan and capping the number of times someone could borrow money. The rules were likely to “restrict” the industry’s revenue by two-thirds, largely by limiting repeat loans, the CFPB said when it finalized the rules last year.
Many Republicans and the payday lenders complained the rule would cripple the industry and didn’t take into consideration the needs of consumers who use and like the service. “The bureau’s rule was crafted on a predetermined, partisan agenda that failed to demonstrate consumer harm from small-dollar loans, ignored unbiased research and data, and relied on flawed information to support its rulemaking,” Dennis Shaul, chief executive of the Community Financial Services Association of America, the primary industry group for payday lenders, said in a statement.
In its statement, the CFPB did not explain its decision or indicate how it could potentially change the rule. “The bureau intends to engage in a rulemaking process so that the bureau may reconsider the payday rule,” the statement said. Noting that parts of the rule went into effect Tuesday, the CFPB also said it would “entertain waiver requests” from payday lenders.
Democrats and consumer advocates quickly denounced the announcement. “There is no reason to delay implementation of this rule — unless you are more concerned with the needs of payday lenders than you are with the interests of the consumers these financial bottom-feeders prey upon,” said Karl Frisch, executive director of Allied Progress.
The CFPB has been at the center of a partisan battle for control since its former director, Richard Cordray, announced he was stepping down in late November. Cordray named his former chief of staff, Leandra English as acting director, while Trump picked White House budget director Mulvaney. English is now suing to have Mulvaney thrown out of the job.
“Today’s announcement is a big deal and could become a terrible deal for consumers,” said Rebecca Borné, senior policy counsel at the Center for Responsible Lending. “The human devastation caused by payday loans, which average nearly 400 percent APR, has been extensively documented.”