Payday Industry Put Under Microscope at Congressional Hearing and Yep … They’re Still Terrible
WASHINGTON, D.C. — The key takeaway from today’s congressional hearing on ‘Ending Debt Traps in the Payday and Small Dollar Credit Industry’ is that consumer protections from the payday loan industry are needed now more than ever — and how irresponsible it is for the Trump administration to make it easier for predatory lenders to exploit America’s most vulnerable borrowers. With 15 days left until the public comment period closes on the Trump-Kraninger CFPB proposal to scrap the payday rule’s ability-to-repay standard – which prevents high-interest payday and car title loans from going out to borrowers who cannot possibly pay them back in time — consumer advocacy group Allied Progress is ramping up its social media outreach, including paid digital ads on Twitter and Facebook this week, encouraging users to submit a public comment against the plan at: www.StopPaydayPredators.org
“We’ve heard too many stories from everyday consumers about how payday loans are a financial death trap, not a ‘lifeline’ as industry defenders claimed today,” said Jeremy Funk, spokesman for Allied Progress.“Payday lenders are no benefit to communities as long as they share the same business model as Big Tobacco: hooking consumers into long-term dependency on a harmful product. That’s why three-fourths of the payday industry’s revenues come from repeat borrowers, who on average take out 10 loans and pay nearly 400 percent in mafia-like interest rates and fees. Consumers need all the protection they can get from these kinds of abusive practices.”
Added Funk: “There is no reasonable case to be made for leaving millions more Americans vulnerable to the payday debt trap, but that’s exactly what the Trump administration is proposing to do. They say it’s about expanding ‘access to credit’. But they’re really only interested in expanding access to high-risk, low-quality credit as payback to the payday industry that funneled over $2.2 million into Trump’s campaign and inaugural committees. They say the process that led to the ability-to-repay standard was flawed and rushed despite the over five years of research and input from key communities that supported it. Without a hint of irony, Director Kraninger rushed out with this proposal a matter of weeks into her job, based on little more than suggestions from payday executives. Even she admits scrapping these protections would pad payday industry profits by more than $7 billion a year at the expense of vulnerable consumers. That’s the real payday here.”
WHAT YOU NEED TO KNOW:
CFPB Director Kathy Kraninger Has Sided With The Payday Industry To Gut Borrower Protections Against Predatory Lending—And Put Billions In The Pockets Of Payday Lenders
Kathy Kraninger’s First Major Policy Proposal At The CFPB Was To Gut The CFPB’s Payday Rule And Weaken Protections For Borrowers Who Can’t Afford To Pay Back Their Payday Loans.
Kathy Kraninger Proposed Gutting The CFPB’s Payday Lending Rule And Eliminating Its Crucial Ability-To-Repay Provision, Which Requires Lenders To Verify That Borrowers Can Repay Their Loans.
In February 2019, Kathy Kraninger Proposed Gutting The CFPB’s Payday Lending Rule By “Eliminating Nearly All Of The Regulation’s Substantive Requirements, Including The ‘Ability To Repay’ Mandate.” “Payday lenders won a major victory on Wednesday after the Consumer Financial Protection Bureau moved to gut tougher restrictions that were to take effect later this year. The industry has spent years trying to fend off the new rules, which were conceived during the Obama administration. The regulations were intended to prevent spiraling debt obligations by limiting the number of consecutive loans that could be made and requiring lenders to verify that borrowers could pay back their loans on time while still covering basic living expenses. 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, 02/06/19]
The Proposed Changes Could Also Narrow How The CFPB Interprets Unfair, Deceptive, Or Abusive Acts Or Practices (UDAAPs), Affecting Industries Beyond Payday Lenders.
The CFPB’s Proposed Revision To The Payday Rule May Narrow The Interpretation Of “What Constitutes A UDAAP”—An Unfair, Deceptive, Or Abusive Act Or Practice. “The Consumer Financial Protection Bureau’s overhaul of its payday lending rule rolls back a key policy of the prior Obama-appointed leadership. But some observers say the move goes beyond any single regulation. In proposing to unwind the rule, the CFPB appears to rely on a legal doctrine regarding ‘unfair, deceptive or abusive acts or practices.’ A UDAAP is prohibited under the Dodd-Frank Act, but the CFPB can determine what types of conduct meet that designation. By softening its view toward payday lenders, some experts say the CFPB is also clarifying what constitutes a UDAAP. Such a move, long sought by the financial services industry, could have wide-ranging effects on how the bureau enforces rules at companies other than payday lenders.” [Kate Berry, “Why CFPB payday revamp is an even bigger deal than you think,” American Banker, 03/29/19]
- A Former CFPB Attorney Said The Payday Rule Change Would Set “A Narrower Interpretation Of UDAAP.” “The bureau had cited UDAAP in the original 2017 rule, which required payday lenders to verify borrowers’ repayment ability. The agency had said then that high-cost, small-dollar loans were both ‘unfair’ and ‘abusive.’ But under Kraninger, the agency rescinded that finding and proposed that the underwriting requirement be eliminated. ‘A deeper and more rigorous analysis of the unfairness and abusive standards is a refreshing change,’ said Jenny Lee, a partner at Arent Fox and a former CFPB enforcement attorney. Some see the move as more generally narrowing the agency’s reach. ‘They are putting on the record a narrower interpretation of UDAAP, and are making a second argument — that the bureau misapplied the law the first time around,” said Casey Jennings, an attorney at Seward & Kissel and a former CFPB attorney, who worked on the 2017 payday rule.” [Kate Berry, “Why CFPB payday revamp is an even bigger deal than you think,” American Banker, 03/29/19]
The Payday Industry Is Expected To Make Over $7.3 Billion From The CFPB’s Planned Rollback Of The Payday Rule.
According To The CFPB’s Own Analysis, The Payday Lending Industry Is Estimated To Make $7.3 To $7.7 Billion From Kraninger’s Proposed Rollback Of The Payday Rule.
During Her March 2019 Appearance Before The Senate Banking Committee, Kathy Kraninger Acknowledged That The CFPB’s Own Analysis Found That “The Payday Lending Industry, On An Annualized Basis, Would Save About $7.3 To $7.7 Billion That They Would Not Otherwise Have Under The Previous Rule.” “VAN HOLLEN: Thank you. I’m looking at your analysis here now. Are you familiar with the Dodd-Frank Act Section 1022-b3 analysis that accompanied the notices? KRANINGER: Yes, Senator. VAN HOLLEN: And, are you familiar with the fact that you found that the payday lending industry, on an annualized basis, would save about $7.3 to $7.7 billion that they would not otherwise have under the previous rule? KRANINGER: Senator again there were a number of things that were looked at including – VAN HOLLEN: I’m just asking you about this provision which is right here in the documents you submitted. Does it conclude that by rescinding the rule on an annualized basis payday lenders will be able to pocket $7.3 to $7.7 billion dollars more? Isn’t that what it says right here? KRANINGER: Yes, Senator it does.” [Press Release, Sen. Chris Van Hollen, 03/12/19]
Two Dozen States Attorneys General Oppose The CFPB’s Proposal To Gut The Payday Rule.
In March 2019, Two Dozen State Attorneys General Sent A Letter To The CFPB Opposing Its Proposal To Gut The Payday Rule And Allow Lenders To Take Advantage Of Vulnerable Borrowers.
In March 2019, Two Dozen State Attorneys General Sent A Letter To CFPB Director Kathy Kraninger Criticizing The Bureau’s Proposal To Repeal The Ability-To-Repay Provision Of The Payday Rule, Which California AG Xavier Becerra Said “‘Would Allow Payday Lenders To Target And Take Advantage Of Our Nation’s Most Vulnerable Borrowers.’” “California’s attorney general joined a coalition of two dozen other state attorneys general on Tuesday in opposing the Trump administration’s efforts to delay a consumer protection rule for payday lenders. The federal Consumer Financial Protection Bureau last month proposed repealing a 2017 ‘ability-to-pay’ requirement that the industry opposed. The Obama administration proposed the rule as a way to end predatory lending against low-income Americans. ‘The Trump political appointees at the Consumer Financial Protection Bureau have forgotten the essential mission of their agency — to protect consumers,’ said California Attorney General Xavier Becerra. ‘The CFPB’s proposed rule change would allow payday lenders to target and take advantage of our nation’s most vulnerable borrowers rather than issue loans based on a person’s ability to pay.’” [Jeff Daniels, “California opposes efforts by Trump administration to delay protections from payday lenders,” CNBC, 03/19/19]
- The Letter Warned That The Attorneys General Would “‘Not Hesitate To Consider Taking Legal Action If CFPB Unlawfully Proceeds.’” “The letter was sent to CFPB Director Kathleen Kraninger. In the letter, the state attorneys general criticized the Trump administration’s delay in implementing the rule and alternative proposals that would rescind the provision. Among the other state attorneys general signing the letter were Letitia James of New York and Gurbir Grewal of New Jersey. […] Finally, the attorneys general warned ‘we will not hesitate to consider taking legal action if CFPB unlawfully proceeds.’” [Jeff Daniels, “California opposes efforts by Trump administration to delay protections from payday lenders,” CNBC, 03/19/19]
The Payday Industry Was An Early Supporter Of Kathy Kraninger’s Nomination To Lead The CFPB.
On June 18, 2018, The Community Financial Services Association Of America (CFSA), The Payday Industry’s Trade Group, Swiftly Endorsed Kathy Kraninger After She Was Nominated To Lead The CFPB…
On June 18, 2018, The Community Financial Services Association Of America (CFSA) Issued A Press Release Congratulating Kathy Kraninger On Her Nomination And Stating That It Looked Forward To Working With Kraninger As The CFPB “Reconsiders – And Hopefully Repeals –” The “Severely Flawed” Payday Rule. “CFSA congratulates Kathy Kraninger on her nomination to serve as CFPB Director. The CFPB needs a Director who will listen to consumers and rely on unbiased data and research to guide its work. Ms. Kraninger is a longtime public servant and we hope that under her leadership the Bureau fulfills its intended mission as a truly independent, non-partisan agency that serves American consumers. Since its creation, the Bureau’s agenda has been guided by partisan politics, which has led to harmful, biased rulemaking – notably its rulemaking that led to the Bureau’s seriously flawed small-dollar lending rule. CFSA looks forward to working with Ms. Kraninger as the Bureau reconsiders – and hopefully repeals – this severely flawed rule, and to craft commonsense regulations that appropriately balance consumer protection with access to credit moving forward.” [Press Release, “CFSA Statement on Nomination of Kathy Kraninger as CFPB Director,” Community Financial Services Association of America, 06/18/18]
…The Same Day That President Trump Announced His Intent To Nominate Kraninger…
On June 18, 2018, President Donald Trump “Announced His Intent To Nominate” Kathy Kraninger To Lead The Consumer Financial Protection Bureau (CFPB). On June 18, 2018, President Donald Trump “announced his intent to nominate” Kathy Kraninger to be Director of the Bureau of Consumer Financial Protection Bureau (CFPB). [“President Donald J. Trump Announces Intent to Nominate and Appoint Personnel to Key Administration Posts,” The White House, 06/18/18]
…And Only Three Days After Kraninger’s Expected Nomination Was First Reported.
On June 15, 2018, TheNew York Times Reported That Mick Mulvaney Had Tapped Deputy Kathy Kraninger To Lead The CFPB. “Mick Mulvaney, the White House budget director and acting head of the Consumer Financial Protection Bureau, has picked a deputy at the budget office, Kathy Kraninger, to succeed him at the consumer watchdog agency, according to two people familiar with the situation. Ms. Kraninger, who oversees the preparation of the budgets for several cabinet departments, was selected over the objection of some officials inside the White House, who argued that her relative inexperience — and association with Mr. Mulvaney — could scuttle her nomination. The appointment is likely but not yet final, the officials said.” [Glenn Thrush, “Mulvaney Is Said to Want Deputy to Succeed Him at C.F.P.B.,” The New York Times, 06/15/18]
The Payday Lending Industry Continues To Push The Trump Administration To Loosen CFPB Regulations—And Has Held Their Annual Conferences At A Trump Resort Two Years In A Row
Under Mick Mulvaney’s Leadership, The CFPB Partnered With Payday Industry Groups Including CFSA To Delay The Bureau’s Own Rule.
In May 2018, The CFPB Filed A Joint Motion With Payday Industry Groups Including CFSA To Delay The Bureau’s Own Payday Lending Rule.
In May 2018, Mick Mulvaney’s CFPB Filed A Joint Motion With Payday Lending Industry Trade Groups To Delay Implementation Of The Payday Lending Rule. “The CFPB and the payday industry groups [The Community Financial Services Association of America and the Community Service Alliance of Texas] filed a joint motion May 31 to stay both the regulation and the litigation filed in April. A proposal to rewrite or repeal the existing payday rule would be introduced in February 2019, according to the motion.” [Evan Weinberger, “CFPB Payday Rule Will Go Live Next Year, Judge Says,” Bloomberg News, 06/13/18]
In June 2018, The Judge Rejected The Joint Request Of CFSA And The CFPB To Delay The Rules Effective Date.
Despite Both Sides’ Best Efforts, A Judge Denied Their Request To Delay The Rule’s Effective Date. “The Consumer Financial Protection Bureau’s payday lending regulations will take effect next year despite a request from the bureau and industry groups to delay its effective date while the rule is reworked. Judge Lee Yeakel of the U.S. District Court for the Western District of Texas on June 12 rejected a request from the CFPB, the Community Financial Services Association of America, and the Community Service Alliance of Texas to stay the effective date until 445 days after a new version of the rule is completed.”[Evan Weinberger, “CFPB Payday Rule Will Go Live Next Year, Judge Says,” Bloomberg News, 06/13/18]
In March 2018 CFPB Acting Deputy Director Brian Johnson Met With The Community Financial Services Association (CFSA) To Discuss Payday Lending…
On March 15, 2018, Brian Johnson, With The CFPB’s Office Of Financial Institutions And Business Liaison, Met With “The Community Financial Services Association (CFSA) To Discuss Payday Lending.” On March 15, 2018, Acting Deputy Director Brian Johnson (then Senior Advisor at the CFPB), with the CFPB’s Office of Financial Institutions and Business Liasion, met with “the Community Financial Services Association (CFSA) to discuss payday lending.” [CFPB Two Week Look Ahead March 11 – 24, 2018, FOIA Response CFPB-2018-475-F (pp. 29-31)]
…Just Three Weeks Before CFSA Filed A Lawsuit Against The CFPB Attempting To Block Its Payday Rule Last Year.
On April 9, 2018, The Community Financial Services Association Of America (CFSA) Filed A Lawsuit In The U.S. District Court For The Western District Of Texas Against The Consumer Financial Protection Bureau (CFPB) “Seeking To Invalidate The Bureau’s Final Rule On ‘Payday, Vehicle Title, And Certain High-Cost Installment Loans.’” “The Community Financial Services Association of America (CFSA) and the Consumer Service Alliance of Texas today filed a lawsuit in the U.S. District Court for the Western District of Texas, Austin Division, against the Consumer Financial Protection Bureau (CFPB or Bureau) seeking to invalidate the Bureau’s final rule on ‘Payday, Vehicle Title, and Certain High-Cost Installment Loans.’ The lawsuit alleges that the rule violates the Administrative Procedure Act (APA) because it exceeds the Bureau’s statutory authority and is arbitrary, capricious, and unsupported by substantial evidence. The lawsuit also argues that the CFPB’s structure is unconstitutional under the Constitution’s separation of powers because the agency’s powers are concentrated in a single, unchecked Director who is improperly insulated from both presidential supervision and congressional appropriation, and hence unaccountable to the American people.” [“CFSA Files Lawsuit Against Consumer Financial Protection Bureau over small-dollar loan rule,” Community Financial Services Association of America, 04/09/18]
- “The Final Rule rests on unfounded presumptions of harm and misperceptions about consumer behavior, and was motivated by a deeply paternalistic view that consumers cannot be trusted with the freedom to make their own financial decisions,” the plaintiffs’ Complaint states. “In fact, the Bureau ignored and attempted to discount the available research showing that short-term, small-dollar loans result in improved financial conditions, not harm, because in many cases they are better than the alternative options available to consumers.” [“CFSA Files Lawsuit Against Consumer Financial Protection Bureau over small-dollar loan rule,” Community Financial Services Association of America, 04/09/18]
CFSA Claimed The CFPB Violated Procedural Requirements During The Public Comment Period “As It Rushed To Finalize” The Payday Rule.
According To CFSA’s Complaint, The CFPB’s Rulemaking “Violated The Procedural Requirements Of The Administrative Procedure Act,” Claiming That “Serious Concerns Arose During The Comment Period Over The Inaccurate Categorization Of Comment Letters, And The Questionable And Inconsistent Process Through Which The Bureau Posted Comment Letters For Public Viewing As It Rushed To Finalize The Rule.” “The CFPB’s rulemaking also violated the procedural requirements of the Administrative Procedure Act. Throughout the rulemaking process and during the rule’s public comment period, the Bureau ignored the input of small-dollar loan customers. Serious concerns arose during the comment period over the inaccurate categorization of comment letters, and the questionable and inconsistent process through which the Bureau posted comment letters for public viewing as it rushed to finalize the rule. Questions also arose about whether the CFPB was appropriately reviewing and considering all public comments as required by the APA.” [“CFSA Files Lawsuit Against Consumer Financial Protection Bureau over small-dollar loan rule,” Community Financial Services Association of America, 04/09/18]
- “‘The Bureau received more than 1.4 million written comments from interested persons, including over one million comments from consumers who opposed the proposed rule. Showing disdain for the views of those who will be most affected by the Final Rule, however, the Bureau failed to adequately take these highly relevant comments into account or give them the individualized consideration required by the APA,’ reads the Complaint.” [“CFSA Files Lawsuit Against Consumer Financial Protection Bureau over small-dollar loan rule,” Community Financial Services Association of America, 04/09/18]
Last Month, The Community Financial Services Association Of America (CFSA), The Payday Industry’s Trade Group, Held Its Annual Conference At Donald Trump’s National Doral Resort In Miami For The Second Year In A Row.
In March 2019, The Community Financial Services Association Of America (CFSA) Held Its Annual Conference At Trump Doral In Miami For The Second Year In A Row—This Time Only About A Month About The Trump Administration’s Consumer Financial Protection Bureau (CFPB) Announced It Was Loosening Regulations For The Industry.
In February 2019, The Community Financial Services Association Of America (CFSA), The Payday Industry’s Trade Group, Held Its 2019 Annual Conference At The Trump Doral In Miami “Roughly A Month After” CFPB Director Kathy Kraninger “Announced Plans To Get Rid Of Key Consumer Protections Governing Payday Lenders.” “The Donald Trump-appointed head of the Consumer Financial Protection Bureau on Thursday announced plans to get rid of key consumer protections governing payday lenders. It was a big win for the industry, which opponent decry as predatory. Roughly a month after that announcement the Community Financial Services Association of America, the trade group that represents the payday lending industry, will be partying at Trump Doral in Miami for its annual conference. It’s the second year in a row the group will be holding its conference at Trump’s Miami resort.” [Marc Caputo, Matt Dixon, and Isabel Dobrin, “Florida Playbook: Bloomberg’s Orlando, Miami swing — Payday party at Trump Doral — Dems post-Parkland gun push,” Politico,02/08/19]
- The Conference Was Held March 18-21, 2019 And Discussed Topics Directly Related To CFPB Policy And Leadership. In its “Save the Date” for the conference, CFSA writes: “Are you up-to-date on the small dollar loan rule or the current legal and regulatory developments impacting the industry? Are you fully informed on the leadership at the Bureau? Are you connected? CFSA is plugged in on the issues of importance to you. The CFSA Annual Conference & Expo is the one place for you to get connected. Join us in Miami at the premier conference for the small-dollar lending industry to network with industry leaders and experts, and engage on topics that matter to you.” The conference will be held from March 18-21, 2019, at the Doral Miami. [“CFSA 2019 Annual Conference and Expo Registration Now Open,” Community Financial Services Association Of America, 09/17/18]
Last Year, CFSA Held Its Annual Conference At Donald Trump’s National Doral Resort In Miami, Florida.
In April 2018, The Community Financial Services Association Of America, A Payday Lending Interest Group, Hosted Its Annual Conference At Trump National Doral In Miami, Florida.“The Community Financial Services Association of America, an interest group that represents the payday loan industry, is hosting its four-day annual conference in April 2018 at Donald Trump’s 90-hole golf resort 12 miles west of downtown Miami.” [Alex Daugherty, “Payday lenders, with major business before Trump, to hold conference at Trump Doral,”Miami Herald, 11/08/17]
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