Office of Consumer Financial Protection Announces Plan to End Pending Payday Loan Rule

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This is one of the first major political positions taken by the new director.

The Consumer Financial Protection Bureau took the first steps on Wednesday to overturn payday lender regulations, announcing plans to change an Obama-era rule that was due to come into effect later this year.

The proposed rule changes would remove a regulation that requires payday lenders to assess whether potential borrowers can repay loans before issuing them.

In a statement, the bureau said its initial finding showed that repealing the rule would increase consumers’ access to credit.

But the new proposal has consumer watch groups, many of whom were staunch supporters of the previous rule, crying out scandal. They say reversing the rule will allow predatory lenders to continue charging triple-digit annual percentage rates on short-term loans that often target low-income communities.

“The Consumer Financial Protection Bureau, under the direction of Kathy Kraninger, has officially given its approval to predatory debt traps,” said Mike Litt of the US Public Interest Research Group. “By offering to get rid of its subscription obligation, the CFPB is undermining its own protections.”

The proposal also drew criticism from House Financial Services president Maxine Waters, who said in a statement she was “deeply troubled” by the proposal to “gut a much needed rule that would have held back payday lenders.” .

“This proposal essentially sends a message to predatory payday lenders that they can continue to harm vulnerable communities without penalty,” Waters said.

After years of research under President Barack Obama, the CFPB moved forward with implementation in October 2017, just weeks before Trump appointed Mulvaney as acting director of the CFPB. It was not to come into force until August.

If Wednesday’s effort bears fruit, the measures that were supposed to take effect in August will never be implemented. Going forward, Kraninger said in a statement that the office will now “assess the comments, weigh the evidence, and then make its decision.”

Former office manager Richard Cordray pushed back the decision on Twitter.

“It’s a bad decision that will hurt the hardest hit consumers” he wrote. “It should and will be subject to serious legal challenge.”

Payday lenders, however, claim they are helping provide a valuable service to the millions of Americans who live paycheck to paycheck and have no savings to face emergencies.

The Trump administration agreed. Mulvaney, accused the agency of overstretching the government.

“Anyone who thinks that a Trump CFPB administration would be the same as an Obama administration is just naïve,” Mulvaney said in 2017 when he took control of the agency.

Consumer watchdogs say the expected proposal is a continuation of Mulvaney’s efforts to disparage the CFPB. Mulvaney was a vocal critic of the Consumer Financial Bureau during his tenure as a congressman from South Carolina, and he accepted campaign contributions from lobbyists in the payday loan industry.

While leading the CFPB, Mulvaney shut down investigations into several lending groups, requested $ 0 in funding for the agency, and significantly reduced the CFPB’s executive power.

The CFPB was created after the 2008 financial crisis to regulate banks and other financial institutions.

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