Debt Trap Revival: Trump/Mulvaney CFPB Announces Plan to Gut Payday Loan Borrower Protections
Trump and CFPB Acting Director Mulvaney Are Attempting to Sabotage the Payday Rule By Eliminating The Ability-To-Repay Standard
Mulvaney and Trump Have Taken Nearly $2 Million from Payday Lenders
WASHINGTON, D.C. — This morning, the Trump/Mulvaney controlled Consumer Financial Protection Bureau (CFPB) announced it would revisit protections for payday loan borrowers slated to go into effect next summer. The duo are targeting the centerpiece of the Bureau’s rule that would require payday lenders to consider a borrower’s ability to repay before making a high-interest loan.
Without the critical ability to repay stipulation remaining intact, payday lenders will continue to trap consumers in cycles of debt where borrowers take out new high-interest loans to pay off old loans again, and again. According to previous reports, many of the CFPB’s career staff are refusing to help Mulvaney gut these important protections with many asking, “why would I want to do things to harm people?”
“Payday lending donors are certainly cashing in on their nearly $2 million investment in President Trump and Mick Mulvaney. These payday predators showered the duo with contributions and in return Mulvaney has dropped industry-focused investigations and enforcement actions. Now Trump and Mulvaney say they want to gut the CFPB’s new rule protecting payday loan borrowers before it has time to go into effect next year. It is clear who Trump and Mulvaney are going to bat for – and it is not consumers,” said Karl Frisch, executive director of Allied Progress.
He continued, “Payday lenders don’t want to take a borrower’s ability to repay a loan into consideration because they make billions of dollars each year trapping these consumers in a nearly impossible to escape debt cycle where the only way borrowers can pay back their loan is by taking out a new loan, over and over again.”
All told, Trump and Mulvaney have taken at least $1,958,150 from payday lenders– the figure includes at least $62,000 in campaign contributions to Mulvaney, $621,150 in campaign contributions to Trump, and at least $1,275,000 in contributions for Trump’s inauguration.
What You Need To Know
In October 2018, Trump’s CFPB Publicly Declared War On The Ability-To-Repay Standard In The Bureau’s Payday Lending Rule.
- On October 26, 2018, The CFPB Announced It Would Revisit The “Ability-To-Repay” Portion of the Payday Loan Rule. “The Bureau expects to issue proposed rules in January 2019 that will reconsider the Bureau’s rule regarding Payday, Vehicle Title, and Certain High-Cost Installment Loans and address the rule’s compliance date. The Bureau will make final decisions regarding the scope of the proposal closer to the issuance of the proposed rules. However, the Bureau is currently planning to propose revisiting only the ability-to-repay provisions and not the payments provisions, in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions.” [Press Release, “Public Statement Regarding Payday Rule Reconsideration and Delay of Compliance Date,” ConsumerFinance.gov, 10/26/18]
But CFPB Career Staff Have Balked At Being Asked To “‘Do Things That Harm People.’”
- However, The Bureau Is Having Trouble Finding Staff Who Are Willing To Work On Revamping The Rule, With Many Asking “‘Why Would I Want To Do Things To Harm People?’”“One former CFPB official said that only a small team of rule writers was working on the redrafted payday lending rule, an effort that is being led by Associate Director David Silberman, a Cordray-era holdover. Finding CFPB employees to work on the rule has been difficult for the current leadership team. The bureau is not forcing holdovers from the Cordray-era to defang a rule that they spent years working on, and few, if any, such employees are volunteering to do so, the source said. Many remaining staff have been asking ‘why would I want to do things to harm people?’ the source said.” [Evan Weinberger, “CFPB Expected to Cut Payday Repayment Tests in Rule Overhaul,” Bloomberg News, 10/19/18]
The Trump CFPB’s Changes Would Keep The Payday Loan Debt Trap Alive For Predatory Lenders.
- The Payday Rule Created Under Director Cordray Aimed To Stop The Debt Trap, By Requiring Lenders To Consider A Borrower’s Ability To Repay Their Loan. “The CFPB’s new rule puts a stop to the payday debt traps that have plagued communities across the country,” said CFPB Director Richard Cordray. “Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.” [“CFPB Finalizes Rule To Stop Payday Debt Traps,” Consumer Financial Protection Bureau, 10/05/17]
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- For Borrowers Who “Cannot Repay Their Debts Quickly, The Loans Are Often Rolled Over, Entangling Those Who Take Them In Hard-To-Escape Spirals Of Ever-Growing Debt.” “The rules announced by the agency, the Consumer Financial Protection Bureau, are likely to sharply curtail the use of payday loans, which critics say prey on the vulnerable through their huge fees. Currently, a cash-strapped customer might borrow $400 from a payday lender. The loan would be due two weeks later — plus $60 in interest and fees. That is the equivalent of an annual interest rate of more than 300 percent, far higher than what banks and credit cards charge for loans. Because most borrowers cannot repay their debts quickly, the loans are often rolled over, entangling those who take them in hard-to-escape spirals of ever-growing debt.” [Stacy Cowley, “Payday Lenders Face Tough New Restrictions by Consumer Agency,” The New York Times, 10/06/17]
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- According To The National Consumer Law Center, The “Common-Sense” Ability To Repay Requirement Restricts “The Number Of Unaffordable Back-To-Back Loans.” “‘The CFPB rule limits payday lenders’ ability to put families into a vicious cycle of debt by adopting the common sense requirement that lenders consider a borrower’s ability to repay and by restricting the number of unaffordable back-to-back loans,’ said Lauren Saunders, associate director of the National Consumer Law Center.” [Lauren Debter, “Consumer Watchdog Reins In Payday Lenders With Strict New Measures,” Forbes, 10/05/17]
Trump and Mulvaney Have Long Been Friends To Payday Lenders
During The 2016 Campaign And Through His Inauguration, President Trump And His Political Supporters Took Over $1.8 Million From The Payday Lending Industry.
During The 2016 Election, President Trump And The PACs Supporting Him Took Over $600,000 From Payday Lenders. “Despite repeatedly claiming that he was funding his own campaign because he couldn’t be bought by special interests like other politicians, candidate Donald Trump found a reliable source of campaign funds in payday lenders. During the 2016 election, the industry contributed at least $621,150 to Trump’s presidential campaign and related super PACs.” [“Report: Trump’s Payday,” Allied Progress, 10/26/18]
After President Trump’s Surprise Win, Payday Lenders Spent Over $1.2 Million On His Inauguration. “In the election of Donald Trump, payday lenders had reason to celebrate. After spending more than $620,000 to help get him elected, the industry opened its collective wallet once again. This time in honor of President-elect Trump at his inauguration which carried a celebratory price tag of at least $1,275,000.” [“Report: Trump’s Payday,” Allied Progress, 10/26/18]
Mulvaney Took More than $60,000 In Campaign Cash From Payday Lenders While He Served In Congress.
In Congress, Mick Mulvaney Took More Than $62,000 in Campaign Cash from Payday Lenders. Mulvaney received $62,950 in payday lending contributions during his congressional career. [Search for Payday Lenders, OpenSecrets.org, accessed 12/13/17.]
Early In His Tenure At CFPB, A Payday Lender Reached Out To Mulvaney To Ask About Applying For The Job Of CFPB Director.
Early In His Tenure At CFPB, Mulvaney Received An Email From A Payday Lender In Which The Lender Asked For Mulvaney’s Help In Becoming The CFPB’s Next Director. “Under Cordray, the CFPB opened in investigation into lending practices at World Acceptance. On Jan. 22, the company said the investigation had been completed without enforcement action. It also said CEO Janet Matricciani had resigned after 2 ½ years in that position. Two days later, Matricciani sent an email to what appears to be Mulvaney’s personal email address to pitch herself as a candidate to lead the CFPB. The email was shared exclusively with The Associated Press by Allied Progress, a left-leaning consumer advocacy group, which obtained the document as part of a Freedom of Information Act request.” [Ken Sweet, “Payday lenders, watchdog agency exhibit cozier relationship,” Associated Press, 03/06/18]
Since Taking Control of the CFPB, Mulvaney Has Gone Soft On Payday Lenders… Including The Ones That Funded His Campaigns
Mulvaney Has Dropped Enforcement Actions Against Predatory Payday Lenders…
In January 2018, Mick Mulvaney Dropped A Lawsuit Against Four Payday Lenders Associated With An American Indian Tribe. “The Consumer Financial Protection Bureau is dropping a lawsuit against a group of payday lenders associated with an American Indian tribe in a sign the regulator is changing direction under Mick Mulvaney, the acting director appointed by the Trump administration.”[Zeke Faux, “CFPB Signals Shift by Dropping Payday Lender Lawsuit,” Bloomberg, 01/18/18]
- The Companies Had Engaged In “Rent-A-Tribe” Lending, Which Allows Them To “Charge Interest Rates Higher Than What States Allow.” “The case was filed in Kansas because the CFPB alleged that the companies largely operated out of a call center in Overland Park, despite being formally organized on an American Indian reservation in California… The business model used by the four companies mirrors what’s referred to as the “rent-a-tribe” structure, where a payday lender nominally establishes its business on American Indian reservations, where state regulations generally do not apply. Some payday lenders favor the model because they can charge interest rates higher than what states allow.” [Steve Vockrodt, “CFPB drops Kansas payday lending case, stoking fears Trump is backing off the industry,” Kansas City Star, 01/19/18]
…Trimmed Their Fines, Sometimes By Up To A Million Dollars…
Mulvaney’s CFPB Settled With Triton Management Group Regarding Their Deceptive Loan Practices. “The Bureau of Consumer Financial Protection… announced a settlement with Triton Management Group, Inc., a small-dollar lender that operates in Alabama, Mississippi, and South Carolina under several names including ‘Always Money’ and ‘Quik Pawn Shop.’” [Press Release, Consumer Financial Protection Bureau, 07/19/18]
- The Fine Mulvaney’s CFPB Agreed To Was Only One Third Of What The Previous CFPB Director Had Sought. “The U.S. consumer finance watchdog ordered [the] Alabama-based payday lender… to return $500,000 to borrowers who were overcharged, a fine that people familiar with the matter said was only a third of what the prior Obama-era head of the agency had sought.” [Patrick Rucker, “U.S. consumer watchdog slashes fine in payday lender settlement,” Reuters, 07/19/18]
- The Mississippi Payday Lender Was Found To Be “Routinely” Overcharging Borrowers And Hiding The True Cost Of Their Loans. “Triton Management, which operates about 100 storefront lending offices across the South, routinely overcharged borrowers in Mississippi, the CFPB said. Customers who went in to borrow a few hundred dollars for about a month could end up paying more than twice that sum if they extended the life of the loan. Triton did not disclose the true costs to borrowers, the CFPB concluded.” [Patrick Rucker, “U.S. consumer watchdog slashes fine in payday lender settlement,” Reuters, 07/19/18]
Mulvaney’s CFPB Settled With The Hydra Group Over Their Unlawful Payday Loan Practices. “…a federal district court in the Western District of Missouri entered an Order effectuating a settlement between the Bureau of Consumer Financial Protection (Bureau) and Richard Moseley, Sr., Richard Moseley, Jr., and 20 interrelated corporate entities controlled by Moseley, Sr. and Moseley, Jr., in the Bureau’s lawsuit regarding the unlawful origination and servicing of short-term, small-dollar online loans to consumers nationwide.” [Press Release, Consumer Financial Protection Bureau, 08/10/18]
- In Addition To Forfeiting Assets, The Settlement Called For Just A $1 Civil Fine Against The Men Involved In The Scheme. “The consent order entered into… calls for the Moseleys to forfeit approximately $14 million in frozen assets. A $69 million order to pay defrauded borrowers was suspended. According to the order, the suspended judgment and $1 civil fine were set because of the “defendants’ limited ability to pay.” [Brian Kaberline, “KC-based payday lenders will pay civil fine of just $1,” Kansas City Business Journal, 08/13/18]
- The Group Was Accused of making loans to consumers “that the borrowers had not authorized and charged biweekly ‘finance charges’ indefinitely.” “Federal officials say the Moseleys operated a group of companies, referred to as the Hydra Lenders, that made $227.7 million in loans, generating $69.6 million in gross profits, since January 2008, according to a consent order. A bureau complaint alleges that the Hydra Group made loans to consumers that the borrowers had not authorized and charged biweekly “finance charges” indefinitely.” [Brian Kaberline, “KC-based payday lenders will pay civil fine of just $1,” Kansas City Business Journal, 08/13/18]
…And Even Dropped The Investigation Into A Payday Lender That Gave Him Thousands In Campaign Cash.
Also in January 2018, Mick Mulvaney’s CFPB Dropped An Investigation Into World Acceptance Corporation, A Payday Lender That Has Donated Thousands To Him. “World Acceptance Corporation, one of the largest small-loan consumer finance companies in North America, today announced the company received a letter from the Consumer Financial Protection Bureau indicating the investigation into the company’s marketing and lending practices has been completed. More importantly, the CFPB noted it does not intend to recommend enforcement action. As a result, the company is relieved of the document-retention obligations required by the bureau’s investigation.” [Press Release, World Acceptance Corporation, 01/22/18]
- “World, which does business as World Finance, was the subject of an investigation by ProPublica and Marketplace last May. Our story showed how the company’s loans are deceptively expensive and often trap borrowers in a cycle of debt. World’s business hinges on convincing low-income borrowers to renew their loans over and over again, a practice that can radically increase the amount of interest they pay. The company also packages nearly useless insurance products with its loans in many states, allowing it to skirt state interest rate caps, our investigation found. World boasts more than 800,000 customers.” [Paul Kiel, “High-Cost Lender World Finance Target of Federal Probe,” ProPublica, 03/13/14]
Mulvaney’s CFPB Is Attempting To Sabotage The Payday Rule By Eliminating The Ability To Repay Standard.
Mulvaney Is Trying To Sabotage Ability To Repay Requirements Under The CFPB’s “Payday Rule…”
The CFPB Is Expected To Propose A Rule That Would Eliminate Or Delay The “Ability To Repay Standard” For Payday Loans. “Payday lenders could escape tighter regulation as the Trump-led Consumer Financial Protection bureau considers eliminating a requirement that they first assess borrowers’ ability to repay loans. The CFPB is expected to either propose eliminating the rule’s strict ability to repay standards or delaying their effective date so that they can undergo further review, according to multiple sources with knowledge of the rulemaking process.” [Evan Weinberger, “CFPB Expected to Cut Payday Repayment Tests in Rule Overhaul,” Bloomberg News, 10/19/18]
Mulvaney’s Changes Would Keep The Payday Loan Debt Trap Alive For Predatory Lenders.
The Payday Rule Created Under Director Cordray Aimed To Stop The Debt Trap, By Requiring Lenders To Consider A Borrower’s Ability To Repay Their Loan. “The CFPB’s new rule puts a stop to the payday debt traps that have plagued communities across the country,” said CFPB Director Richard Cordray. “Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail.” [“CFPB Finalizes Rule To Stop Payday Debt Traps,” Consumer Financial Protection Bureau, 10/05/17]
- For Borrowers Who “Cannot Repay Their Debts Quickly, The Loans Are Often Rolled Over, Entangling Those Who Take Them In Hard-To-Escape Spirals Of Ever-Growing Debt.” “The rules announced by the agency, the Consumer Financial Protection Bureau, are likely to sharply curtail the use of payday loans, which critics say prey on the vulnerable through their huge fees. Currently, a cash-strapped customer might borrow $400 from a payday lender. The loan would be due two weeks later — plus $60 in interest and fees. That is the equivalent of an annual interest rate of more than 300 percent, far higher than what banks and credit cards charge for loans. Because most borrowers cannot repay their debts quickly, the loans are often rolled over, entangling those who take them in hard-to-escape spirals of ever-growing debt.” [Stacy Cowley, “Payday Lenders Face Tough New Restrictions by Consumer Agency,” The New York Times, 10/06/17]
- According To The National Consumer Law Center, The “Common-Sense” Ability To Repay Requirement Restricts “The Number Of Unaffordable Back-To-Back Loans.” “‘The CFPB rule limits payday lenders’ ability to put families into a vicious cycle of debt by adopting the common sense requirement that lenders consider a borrower’s ability to repay and by restricting the number of unaffordable back-to-back loans,’ said Lauren Saunders, associate director of the National Consumer Law Center.” [Lauren Debter, “Consumer Watchdog Reins In Payday Lenders With Strict New Measures,” Forbes, 10/05/17]
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