Congress Must Now Pass a National Rate Cap to Contain Damage of Trump CFPB’s Final Rule That Pushes Millions More Americans Into the Payday Loan Debt Trap
Washington D.C. – Consumer watchdog group Allied Progress is calling on Trump CFPB Director Kathy Kraninger to resign after selling out millions of vulnerable Americans to predatory lenders as the economy continues to slip further into recession, especially in communities of color. In a complete and total abrogation of her responsibility to protect consumers, Director Kraninger issued a final payday and car-title lending rule today doing away with one of the strongest safeguards against the payday loan debt trap. Kraninger’s decision to permanently scrap the ability-to-repay standard established in 2017 by former director Richard Cordray – which even she herself admitted would save consumers over $7 billion in fees every year – has been the #1 priority of the payday loan industry that has handed Donald Trump millions of dollars for his campaign and personal business.
The final rule follows an explosive New York Times report revealing former acting director Mick Mulvaney and other Trump political appointees ‘pressured the bureau’s economists to use “inaccurate and inappropriate” data’ in order to justify scrapping the requirement that payday lenders consider a borrowers’ ability to repay high-interest loans on time. While it is an egregious end of a rulemaking process that has been tainted by industry influence at every step, Congress’ work is just beginning. Allied Progress urged Congress to immediately pass the “Veterans and Consumers Fair Credit Act,” bipartisan legislation backed by several veterans advocacy groups that expands the Military Lending Act’s 36% interest rate cap to all consumers nationwide.
“Director Kraninger just stamped an official seal of approval on one of the worst practices of payday lenders — and now there’s nothing stopping the industry from ruining families with 400 percent interest rates in the middle of a recession. For the sake of all U.S. consumers, the Director needs to step aside,” said Jeremy Funk, spokesman for Allied Progress, the group behind CFPBWatch.org. “Kathy Kraninger should step through the revolving door already and take whatever high-paying industry job she’s been auditioning for ever since assuming this role. What consumers really can’t afford right now is a CFPB Director that wakes up every day worrying about pleasing President Trump’s industry donors even when it’s at their expense. Instead of using every resource at her disposal to shut down a rash of financial scammers coming out of the woodwork in a fragile economy, Kraninger is making things worse by ushering in a new generation of predatory lenders.
Added Funk: “And now Congress must step in and clean up the mess by passing a national rate cap — a protection that has already worked wonders keeping predatory lenders off the backs of our brave service members and their families. This would keep billions of dollars in consumers’ pockets at a time they need it most, throwing cold water on the Kraninger plan to reward the bottom feeders of the financial industry. Director Kraninger has been methodical in her efforts to leave the Bureau in a weaker place than she found it – bringing on more and more financial industry insiders to help her take away consumer protections. Is it too much to ask that the Consumer Financial Protection Bureau be headed by someone who actually cares about its mission to protect consumers?”
BACKGROUND: In her first major action as CFPB Director, Kathy Kraninger unveiled a proposed rule in February 2019 that would scrap the core provision of a regulation on payday and car-title lending the agency finalized in 2017, the ability-to-repay standard. This protection stops payday lenders from approving high-interest loans – that average nearly 400% APR – to struggling people they know cannot pay them back in time. In August 2019, Kraninger officially delayed the Obama-era regulation from taking effect for 15 months – a gift to the payday loan industry that gave over $2 million to Donald Trump and spent another $1 million holding ritzy conferences at the Trump Doral golf resort. Kraninger’s decision to delay common sense protections against the worst payday industry practices has already cost consumers over $4.6 billion in abusive fees and penalties. The Trump CFPB has admitted that their roll back scheme is not supported by “any new” academic research and will pad profits of the payday industry by more than $7 billion annually. In contrast, the original Obama-era payday rule was carefully crafted after 5 years of research and input from the full spectrum of stakeholders.
Allied Progress has documented the corruption of the payday rulemaking process since the beginning, including:
- Reports in February 2019 that Hilary Miller, the president of a payday lending trade group, had negotiated with the Trump CFPB as it was considering its new proposed payday rule.
- In March 2019, the Community Financial Services Association of America, the top payday industry trade group, held its second conference at the Trump National Doral just weeks after the Bureau released its industry-friendly proposed rule. The combined costs of the two conventions at Trump National Doral was reported to be “about $1 million.
- As the public comment period on Kraninger’s proposed payday rule came to a close in May 2019, an Allied Progress analysis found that over 7,000 pro-industry comments used suspiciously duplicative language and hundreds included identical ‘personal’ anecdotes.
- In May 2019, Thomas Pahl, a senior CFPB official, admitted to Congress that the Bureau’s proposed rule rolling back the ability-to-repay standard was not based on “any new research.”
- In September 2019, during a payday industry-sponsored webinar, payday executive Mike Hodges bluntly discussed how contributions to the Trump campaign had bought access to his administration and promises of favorable regulations for his industry.
- In October 2019, Vice President Mike Pence was the keynote speaker at a Trump campaign fundraiser co-hosted by payday executives, Tina and Mike Hodges, and Garry McNabb, the owner of payday lender, Cash Express. Tickets ranged between $1,000 and $100,000.
- In November 2019, it was revealed that payday industry executive Mike Hodges paid Mick Mulvaney’s former congressional Chief of Staff $350,000 to lobby the White House on the payday rule and CFPB issues.