Consumers Would Have Saved Over $6B a Year Starting Today, Then Trump Happened
In Payback to Trump’s Predatory Lending Donors, CFPB Delayed Rule Protecting Vulnerable Communities From the Payday Loan Debt Trap Today
Washington DC (August 19th, 2019) — This was supposed to be a great day for consumers, until the Trump CFPB messed it all up on behalf of Trump’s donor friends in the payday lending industry. In June, the administration issued a final rule rewarding the payday industry with a 15-month delay from compliance with the ability-to-repay standard of the CFPB’s short term lending rule established in November 2017. If the Bureau had done nothing, the rule would have gone into effect today and predatory payday lenders would have been prohibited from approving high-interest loans – that average 300 percent APR and come as high as 950 percent – to borrowers they know do not have the ability to repay them in time.
By conservative estimates, the new payday protection would have started saving consumers nearly $6.4 billion in fees every year – or $202 per second– while even CFPB Director Kathy Kraninger admits the damage that could have been spared to vulnerable communities exceeds $7 billion. Consumer watchdog group Allied Progress called the delay of the rule ‘payback’, pure and simple, for the $2.5 million the payday industry gave to Donald Trump’s campaign and inaugural committees, and the estimated $1 million the payday trade association spent holding its annual conference at Trump’s Doral Golf Resort in March.
“This isn’t theoretical anymore. Starting now, consumers will be punished with billions of dollars in abusive fees from predatory lenders they would have avoided if the Trump administration had just done nothing,” said Jeremy Funk, spokesman for Allied Progress. “There was no good reason to withhold this protection from consumers. The CFPB even admitted it was not based on a shred of new academic research, while the original rule was carefully crafted after 5 years of research and input from the full spectrum of stakeholders. The facts of the payday lending industry haven’t changed in the last two years – the only thing that’s changed is we have a President and a CFPB Director who don’t care if businesses prey on consumers, as long as their big campaign checks continue to clear.
Added Funk: “Making things worse for consumers has been standard operating procedure at the Trump CFPB, but they still have ability to stop the bleeding with a final rule that restores the ability-to-repay standard. The choice is theirs: keep the campaign money spigot open from the predatory lending industry, or save consumers billions of dollars every year by keeping them out of the payday debt trap. If the administration wants to keep the economy out of a recession, putting over $6 billion back into the pockets of consumers is a good place to start.”
In May, Allied Progress exposed thousands of suspicious, duplicative pro-industry comments that were designed to look like personal stories, including over 200 comments from purported borrowers who claimed verbatim that a payday loan was “needed to replace my hot water tank.” If the CFPB fully repeals the ability-to-repay standard, they should admit the real reason why and not hide behind thousands of industry-manufactured comments as evidence of public support for abusive 300 percent interest loans.