Kraninger Will Soon Decide Between Another Giveaway to Predatory Lenders, or Protecting Consumers

Washington D.C. – Trump CFPB Director Kathy Kraninger is expected to make a decision this month between caving to yet another demand from the payday loan industry, or standing up for vulnerable borrowers. During a Congressional hearing in October, Kraninger testified she will respond ‘within a year’ to a formal petition filed last December by payday lending company Advance Financial that urges the bureau to exempt at least the debit cards portion from the CFPB payday and car title rule’s Payment Provisions. The industry wants to do away with these provisions because they limit the amount of automatic withdrawal attempts a lender can make on a borrower’s bank account. These consumer protections are working to prevent excessive fees that could compile with daily withdrawal attempts, “both late fees from the payday lender and overdraft fees from the bank.”

While the CFPB received Advance Financial’s petition in December 2018, Director Kraninger explicitly ruled out any changes to “Payment Provisions” in her February 2019 notice of proposed rulemaking on small dollar loans. Furthermore, the Bureau told a court in March 2019 that “to date” the Bureau “ha[d] not determined that further action is warranted” on the payments provision. Yet, on October 17th, Kraninger stated Advance Financial’s request is now “on the plate.”

So what changed between March and October 2019? The answer may be as simple as ‘follow the money.’ Video recently surfaced of a September 24th payday industry webinar where Mike Hodges, CEO of Advance Financial, one of the largest payday companies, bragged that the over $1.25 million he’s raised for Donald Trump’s campaign bought access to the White House – and that he’s been led to believe that bringing in more industry donors will secure a favorable final CFPB payday rule. (Kraninger’s proposal currently includes a major concession to the payday industry, the permanent repeal of the ability-to-repay standard.)

In the video, while describing how ‘helpful’ the White House has been on the payday rule, Hodges exhibited some apparent inside knowledge: that the White House wants to scrap “even the payments piece” of the CFPB’s rule.

There is ample reason to take Hodges at his word that he has won additional concessions from the Trump administration. Hodge’s company hired a lobbyist who was Mick Mulvaney’s Chief-of-Staff during his House days and Mulvaney had met with the lobbyist repeatedly while the CFPB has been considering overhauling payday rules. In May 2019, Hodges gave a pro-Trump SuperPAC $250,000 just one week before the CFPB agreed to formally delay the payday rule he believed would hurt his company. And in October, Hodges co-hosted a fundraiser for the Trump campaign that was keynoted by Vice President Mike Pence.

The chain of events raises serious questions. What happened between March and October 2019 that convinced the bureau to reconsider Hodge’s request? Why does the bureau take the petition seriously now when they didn’t in February 2019, more than two months after receiving it? Why was Mr. Hodges apparently privy to non-public information about the administration’s reversal of their position from February? Is it true that Mr. Hodges received some sort of private assurances from the White House that they support scrapping potentially all the payment provisions in the CFPB’s rule? If so, when does the CFPB intend on making this new proposal known — or will it instead be slipped in at the last minute to the payday rule currently under final consideration?

Director Kraninger will soon make a critical choice,” said Jeremy Funk, spokesman for Allied Progress.“Will she give a predatory lender and major Trump donor what they asked for, a reversal on the CFPB’s position on Payment Provisions? Will she confirm what a payday lending executive said on tape: that the White House has already adopted his position and all payment provisions are on the chopping block? Doing so would sock consumers with more exorbitant fees.” 

“Or will Kraninger demonstrate independence for once and do right by consumers by saying ‘No, we’ve done your industry enough favors.’  We’re not holding our breath considering one of her first major actions as Director was proposing to gut perhaps the most critical protection against the payday loan debt trap, the ability-to-repay standard.” 

WHAT YOU NEED TO KNOW:

Payday Lender Mike Hodges Appears To Be On The Verge Of Buying Changes To The Payments Provisions Of The CFPB’s Payday Lending Rule

In February 2019, The CFPB Announced A Payday Rule Rewrite That Would Repeal The “Ability To Repay” Standard Of The Cordray-era CFPB’s Payday Lending Rule

In February 2019, The CFPB Announced A Payday Rule Rewrite That Would Repeal The “Ability To Repay” Standard Of The Cordray-era CFPB’s Payday Lending Rule.

In February 2019, CFPB Director Kathy Kraninger Proposed Eliminating “Nearly All” Of The Substantive Requirements Laid Out In The Cordray-Era CFPB’s Payday Lending Rule. “In her first major policy move, the bureau’s new director, Kathleen Kraninger, proposed eliminating nearly all of the regulation’s substantive requirements, including the “ability to repay” mandate. There was “insufficient evidence and legal support” for the provision, the bureau said. It also sought to drop a limit that would have prevented lenders from making more than three short-term loans without a 30-day “cooling off” period.” [Stacy Cowley, “Consumer Protection Bureau Cripples New Rules for Payday Loans,” The New York Times, 02/09/19]

However, During The Same Announcement, The CFPB Said It Would *Not* Change The Payments Provisions Of The Payday Rule Established Under Richard Cordray.

The CFPB’s February 2019 Notice Of Proposed Rulemaking Regarding The 2017 Payday Rule Specifically Ruled Out Changes To Its Payments Provisions – Even Adding That The Provisions Were “Intended To Increase Consumer Protections From Harm Associated With Lenders’ Payment Practices.”

The CFPB Specifically Stated It Was Not Proposing Any Changes To The Payments Provisions Of The 2017 Payday Rule When It Released Its Notice Of Proposed Rulemakings (NPRMs) In February 2019. “Today’s NPRMs do not propose to reconsider the provisions of the 2017 final rule governing payments, including reconsidering the scope of their coverage. The payment provisions prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals. The payment provisions also require such lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels.” [Press Release, Consumer Financial Protection Bureau, 02/06/19]

  • “These Provisions Are Intended To Increase Consumer Protections From Harm Associated With Lenders’ Payment Practices.” [Press Release, Consumer Financial Protection Bureau, 02/06/19]

The Payments Provisions Of The Cordray-era Payday Rule Were Originally Designed To Prevent “Further Harms To Consumers” After Failure Of Multiple Withdrawals From A Consumer’s Bank Account.

The Payments Provisions Of The Payday Rule State That It Is “An Unfair And Abusive Practice” To Attempt Withdrawals From A Consumer’s Account “After Two Consecutive Payment Attempts Have Failed,” Without Obtaining The Consumer’s Authorization Anew.

The CFPB Included The Payments Provisions Because It Determined It Is “An Unfair And Abusive Practice” To “Withdraw Payment From Consumers’ Accounts After Two Consecutive Payment Attempts Have Failed” Without A Consumer’s Authorization. “Second, for the same set of loans along with certain other high-cost longer-term loans, the rule identifies it as an unfair and abusive practice to make attempts to withdraw payment from consumers’ accounts after two consecutive payment attempts have failed, unless the consumer provides a new and specific authorization to do so.” [Docket No. CFPB-2016-0025, Federal Register, 11/17/17]

The CFPB Was Concerned Repeated Attempts To Make Withdrawals Would Subject Consumers To “Fees And Other Harms” Because The Withdrawals Are “Unlikely To Succeed, Yet They Clearly Result In Further Harms To Consumers.”

The CFPB Was Concerned Repeated Attempts To Make Withdrawals Would Subject Consumers “To Multiple Fees And Other Harms” Because They “Are Very Unlikely To Succeed, Yet They Clearly Result In Further Harms To Consumers.” “In addition, many lenders may seek to obtain repayment of covered loans directly from consumers’ accounts. The Bureau is concerned that consumers may be subject to multiple fees and other harms when lenders make repeated unsuccessful attempts to withdraw funds from their accounts. In these circumstances, further attempts to withdraw funds from consumers’ accounts are very unlikely to succeed, yet they clearly result in further harms to consumers.” [Docket No. CFPB-2016-0025, Federal Register, 11/17/17]

This Announcement Came Despite The Fact That In December 2018, Advance America And Mike Hodges Had Petitioned For The Trump-CFPB To Modify The Payments Provision Of The Cordray-Era CFPB Payday Rule.

In December 2018, Advance Financial Formally Requested The CFPB “Exclude Debit Cards From The [Payday] Rule’s Payment Restrictions,” As Recommended By A Small-Business Panel.

In December 2018, Advance Financial Formally Requested The CFPB “Exclude Debit Cards From The [Payday] Rule’s Payment Restrictions That Seek To Limit How Often A Lender Can Access A Consumer’s Checking Account.” “The Consumer Financial Protection Bureau has been determined to move forward with a key piece of its payday lending rule. But a challenge by a Tennessee lender to the rule’s so-called payment provision could stand in the way. The Nashville-based Advance Financial made a formal request in December 2018 that the CFPB exclude debit cards from the rule’s payment restrictions that seek to limit how often a lender can access a consumer’s checking account.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

  • “The rationale is that borrowers do not incur fees for insufficient funds when debit card payments are denied, but generally do face such fees when checks and ACH transfers are denied.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

Advance Financial Believes The CFPB “Erred When It Included Debit Transactions When Barring Lenders From Making More Than Two Unsuccessful Attempts To Collect Payments From An Account” And “Ignored Recommendations Of A Small-Business Panel To Exclude Debit Transactions.” “The company claims the CFPB erred when it included debit transactions when barring lenders from making more than two unsuccessful attempts to collect payments from an account. The petition says the CFPB ignored recommendations of a small-business panel to exclude debit transactions, and that that oversight could expose the bureau to legal risk. ‘The agency made what we consider a very big mistake so we expect the agency to proceed through rulemaking to correct that mistake,’ said Andrew Grossman, a partner at BakerHostetler, who wrote the petition for Advance Financial.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

Then In March 2019, The CFPB Told A Judge, That “To Date” The Bureau “Ha[d] Not Determined That Further Action Is Warranted” On The Payments Provisions.

In March 2019, The CFPB Said It Had Still “Not Determined That Further Action [Was] Warranted” On The Payments Provisions Of The Cordray-Era CFPB Rule. “The Bureau has stated that “if [it] determines that further action is warranted” on the payments provision, it ‘will commence a separate rulemaking initiative.’ 84 Fed. Reg. at 4253. But, to date, it has not determined that further action is warranted or that it will, in fact, commence any such separate rulemaking initiative.” [CFPB v. Community Financial Services Association of America, Case No. 1:18-cv-00295-LY, 03/08/19]

After The CFPB Issued Its 2019 Payday Rule Rewrite, Without Payments Provisions Updates, Mike And Tina Hodges Contributed Over $685,000 To Mostly Republican Candidates Or Trump Re-Election Committees.

In The Six Months After The CFPB Issued Its New Payday Rule, Mike And Tina Hodges Contributed An Additional $688,800 To Mostly Republican Candidates, Including $500,000 To Committees Supporting President Trump’s Re-Election. 

HODGES, MICHAEL LYNN GRAVES FOR CONGRESS 2,500.00 02/14/19
HODGES, MIKE MARK GREEN FOR CONGRESS 2,500.00 02/20/19
HODGES, MICHAEL LYNN MR. NRCC 35,000.00 02/27/19
HODGES, MICHAEL LYNN REPUBLICAN NATIONAL COMMITTEE 35,500.00 03/12/19
HODGES, MICHAEL LYNN REPUBLICAN NATIONAL COMMITTEE 89,500.00 03/12/19
HODGES, TINA K. MRS. REPUBLICAN NATIONAL COMMITTEE 35,500.00 03/12/19
HODGES, TINA K. MRS. REPUBLICAN NATIONAL COMMITTEE 89,500.00 03/12/19
HODGES, MICHAEL L. DUFFY FOR WISCONSIN 1,000.00 03/20/19
HODGES, TINA KING MRS. NRCC 10,000.00 03/21/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE 5,600.00 03/22/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE 5,400.00 03/22/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE (2,800.00) 03/23/19
HODGES, MICHAEL L. MR. MARSHA FOR SENATE (2,700.00) 03/23/19
HODGES, TINA K. MS. MARSHA FOR SENATE 2,800.00 03/23/19
HODGES, TINA K. MS. MARSHA FOR SENATE 2,700.00 03/23/19
HODGES, MICHAEL LYNN MR. FRENCH HILL FOR ARKANSAS 2,800.00 03/28/19
HODGES, MICHAEL LYNN MR. FRENCH HILL FOR ARKANSAS 2,600.00 03/28/19
HODGES, MICHAEL KUSTOFF FOR CONGRESS 2,800.00 03/31/19
HODGES, MICHAEL KUSTOFF FOR CONGRESS 2,800.00 03/31/19
HODGES, TINA KUSTOFF FOR CONGRESS 2,800.00 03/31/19
HODGES, MICHAEL L. MR. TENNESSEE REPUBLICAN PARTY FEDERAL ELECTION ACCOUNT 500.00 04/23/19
HODGES, MICHAEL LYNN AMERICA FIRST ACTION, INC. 250,000.00 05/31/19
HODGES, MICHAEL MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, MICHAEL MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, TINA MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, TINA MCCONNELL SENATE COMMITTEE 2,800.00 06/05/19
HODGES, MICHAEL LYNN DAVID SCOTT FOR CONGRESS 1,000.00 06/17/19
HODGES, TINA KING MRS. NRCC 25,500.00 06/30/19
HODGES, TINA KING MRS. NRCC 9,500.00 06/30/19
HODGES, MICHAEL BISHOP FOR CONGRESS 2,500.00 08/08/19
HODGES, MICHAEL L DAN BISHOP VICTORY COMMITTEE 2,500.00 08/08/19
HODGES, MICHAEL LYNN MR. NRSC 25,000.00 08/16/19
HODGES, MICHAEL L. JOHN ROSE VICTORY FUND 7,500.00 09/09/19
HODGES, MICHAEL L. REPUBLICANS OFFERING SOLUTIONS FOR EVERYONE PAC 1,900.00 09/09/19
HODGES, TINA JOHN ROSE VICTORY FUND 7,500.00 09/09/19
HODGES, TINA REPUBLICANS OFFERING SOLUTIONS FOR EVERYONE PAC 1,900.00 09/09/19
HODGES, MICHAEL L. MR. TEAM HAGERTY 2,800.00 09/12/19
HODGES, MICHAEL L. MR. TEAM HAGERTY 2,800.00 09/12/19
HODGES, TINA K. TEAM HAGERTY 2,800.00 09/12/19
HODGES, TINA K. TEAM HAGERTY 2,800.00 09/12/19
HODGES, MICHAEL STEVE DAINES FOR MONTANA 2,500.00 09/30/19
HODGES, MICHAEL LYNN TEXANS FOR SENATOR JOHN CORNYN INC. 2,800.00 09/30/19

September 2019: Mike Hodges Tells Fellow Industry Insiders He’s Privately Been Told That The White House Policy Stance Is To Remove The Payments Provisions.

In September 2019, Mike Hodges Told His Fellow Payday Lenders The White House Privately Favored Eliminating The Payment Provisions From The CFPB’s Payday Rule.

During A September 2019 Borrow Smart Compliance Webinar, Mike Hodges – CEO Of Advance Financial – Said The Trump Administration Wants To Remove “Even The Payments Piece” Of The CFPB’s Payday Lending Rule.

Advance Financial Chairman Mike Hodges Said In A September 2019 Payday Lending Industry Webinar, “It’s, The White House’s Financial Policy Stance To, To Um, To Remove The Rule And Even The Payments Piece.” “I have gone to the White House and have, the White House has, has been helpful on this particular rule that we’re working on right now. In fact, it’s, the White House’s financial policy stance to, to um, to remove the rule and even the payments piece. So they’ve been helpful. While they don’t control the CFPB, it is helpful to have the White House on your side in policy. [Borrow Smart Compliance Webinar, “The Payday Rule Could Become Effective!Borrow Smart Compliance, 09/24/19 (33:03)]

Later In October 2019: CFPB Director Kathy Kraninger Cites The Petition Filed By Advance Financial In December As The Reason Why The Bureau Will Now Be Reconsidering The Payment Provisions Of The Payday Rule.

In October 2019, CFPB Director Kathy Kraninger Indicated The Bureau Would Now Reconsider The Payment Provisions Of The Payday Rule… Citing A Petition Filed By Mike Hodges’ Company.

In October 2019, CFPB Director Kathy Kraninger Indicated The Bureau Would Reconsider The Payment’s Provision Of The Payday Rule Due To The Petition Filed By Advance Financial And Lobbying From The Payday Industry – Kraninger Also “Signaled That The Agency Has Until December To Respond To The Company.”

During A Senate Banking Committee Hearing In October 2019, CFPB Director Kathy Kraninger Cited Advance Financial’s Request As A Justification For Reconsidering The Payment’s Provision Of The Bureau’s 2017 Payday Rule. “Even though the petition was filed last year, on Dec. 13, CFPB Director Kathy Kraninger brought up the Nashville lender’s request during testimony to Congress earlier this month. The ‘petition for rulemaking and supplementary comment’ allows firms to share feedback after a rule is finalized. Kraninger signaled that the agency has until December to respond to the company. ‘The bureau has received a petition to reconsider or address issues with the payment’s provisions of the 2017 rule in addition to our consideration of the 2017 underwriting requirements,’ she told members of the Senate Banking Committee on Oct. 17. ‘So that is something that at least is on our radar. We have a responsibility to respond to that petition within a year of it being sent to us. So it is on the plate.’” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

At Least One Legal Expert Believes The “Threat Of Litigation” Will Cause The CFPB To Make Changes To The Payday Rule’s Payments Provisions. “Many legal experts think the CFPB will eventually make changes because of the threat of litigation. ‘There is some indication they will look at the debit card issue, and I have to believe that they will act rationally and change the treatment of debit cards before this rule goes finally into effect,’ said Jeremy T. Rosenblum, a partner and co-practice leader at Ballard Spahr, who wrote multiple comments letters about problems with the payment provisions. ‘If they don’t make any changes, they have an important aspect of the rule that is completely arbitrary and capricious which is the standard for invalidation of the rule.’” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

The Payday Industry Has Lobbied The CFPB To Change The Payments Provisions Of The Payday Rule. “The payday industry has lobbied the CFPB to change the rule, arguing that 18 state attorneys general, and numerous small business representatives, credit unions, community banks, and other industry participants want debit card transactions excluded. ‘The industry wants to be able to take debit card payments,’ said Jamie Fulmer, a senior vice president at Advance America, a Spartanburg, S.C., payday lender owned by Mexico’s Grupo Elektra.[Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19]

Compliance With The Payments Provision Is Currently Stayed “Until Mid-2020” Due To The CFPB Siding With The Payday Industry In A Lawsuit To “Invalidate The Original Payday Rule.”

In November 2018, “A Texas Judge Stayed The Compliance Date Of The Payment Provisions […]  After The CFPB Sided With Two Payday Trade Groups That Sued The Bureau To Invalidate The Original Payday Rule.” “Still, it is unclear how much impact the threat of litigation will have given that the rule’s compliance date has been put on hold, indefinitely for now. A Texas judge stayed the compliance date of the payment provisions in November 2018 after the CFPB sided with two payday trade groups that sued the bureau to invalidate the original payday rule.” [Kate Berry, “Nothing comes easy for CFPB in payday lending rule,” American Banker, 10/29/19] 

###

Close

Join The Fight!

We need your help to hold powerful special interests accountable and empower hardworking Americans. Join our fight today!