Trade Group with History of Misleading Government Regulators Endorsed Mulvaney Subordinate Nominated Over Weekend for CFPB Director
WASHINGTON, D.C. – Because of her lack of experience on consumer protection and key financial issues, little is known of Kathy Kraninger’s views on issues important to the work of the Consumer Financial Protection Bureau (CFPB), which President Trump nominated her to lead over the weekend.
That lack of information notwithstanding, today, less than 72 hours after her nomination was made official, the Community Financial Services Association (CFSA), the payday lending industry’s leading trade group, endorsed her nomination.
The same group is currently suing the CFPB to stop important protections for payday loan borrowers from going into effect next year and recently lost a bid in court to join forces with “Acting Director” Mick Mulvaney in an attempt to delay the rule indefinitely.
“Here we are, less than 72 hours after Trump surprised everyone by nominating Kathy Kraninger for CFPB Director. We don’t know where she stands on key issues important to the CFPB’s work. All we know is that she has no experience working in consumer protection or holding big banks and predatory lenders accountable. And yet, the same payday lenders currently suing the CFPB to stop important protections for payday loan borrowers from going into effect is ready to endorse her nomination. What do they know that the rest of the world doesn’t?” asked Karl Frisch, executive director of the consumer advocacy organization Allied Progress.
Payday Lenders Misled the CFPB, Now Want Kraninger to Lead CFPB
- On June 18, 2018, CFSA said they looked forward to working with Kathy Kraninger to repeal the CFPB’s payday lending rule. On June 18, 2018, the Community Financial Services Association of America (CFSA) endorsed Kathy Kraninger to serve as the next CFPB Director. Dennis Shaul, CEO of CFSA, said, “‘CFSA congratulates Kathy Kraninger on her nomination to serve as CFPB Director.’” He went on to say that “‘CFSA looks forward to working with Ms. Kraninger as the Bureau reconsiders – and hopefully repeals’” the small-dollar (payday) lending rule. [Press Release, “CFSA STATEMENT ON NOMINATION OF KATHY KRANINGER AS CFPB DIRECTOR,” CFSAA.org, 06/18/18]
- Last week a federal court denied CFSA and the CFPB’s joint motion to delay the effective date of the payday lending rule. The underlying litigation over the rule itself is ongoing. On June 12, 2018, a Texas federal court “denied a request by acting CFPB Director Mick Mulvaney to halt” the effective date for the CFPB’s payday lending rule. Mulvaney has “sided with two industry trade groups — the Community Financial Services Association of America and Consumer Service Alliance of Texas” in seeking to delay the effective date. Despite the ruling on the effective date issue, “The lawsuit is still ongoing.” [Kate Berry, “Federal judge rejects CFPB’s effort to halt payday rule,” American Banker, 06/13/18 and Kate Berry, “CFPB goes back to the drawing board on payday rule,” American Banker, 06/13/18]
- 40% of Comments Opposing the CFPB Payday Rule Weren’t Sent or Authorized by the People Associated with Them. A survey conducted by Mercury Analytics found that 40% of opposing the CFPB payday lending rule weren’t sent or authorized by the people who associated with them. “A survey conducted by Mercury Analytics for the Journal last year [in 2017] found that 40% of the comments in a batch of 13,000 comments opposing the CFPB rule weren’t actually sent or authorized by the people who associated with them.” [James V. Grimaldi, “Lawmaker Seeks Probe into Fake Comments on Payday-Lending Rule,” The Wall Street Journal, 02/05/18]
- In Mere Minutes, Hundreds of Pro-Payday Consumer Testimonies Submitted to the CFPB Containing Identical Language Were Found. Allied Progress found that hundreds of positive consumer testimonials about payday loans sent to the CFPB contained identical language. [“Group Alleges Cut-And-Paste Job In CFPB Comments Favorable To Payday Loans,” Morning Consult, 09/26/16]
- Payday Lending Used Misleading Rhetoric, Elements of Coercion, and “Scary Warnings” to Get Customers to Comment on the Payday Lending Rule.
- Payday lenders used “high-pitched rhetoric and scary warnings” in to mobilize customers to file comments opposing the CFPB’s payday rules. “With high-pitched rhetoric and scary warnings, the payday lending industry is attempting to mobilize its borrowers to flood the CFPB with comments opposing the agency’s efforts to issue rules regulating the industry. Individual payday lenders, such as Advance America, are providing Internet links to trade group websites that make the process of commenting as simple as… well, taking out a payday loan.” [David Baumann, “Payday Lenders Mobilize Consumers With Dire Warnings,” Credit Union Times, 09/05/16]
- Critics of the payday lending industry suggested “that the letter-writing involve[d] an element of coercion or pressure, directly or implied.” One consumer advocated “called it ‘disingenuous’ for the lenders to boast that the letters reflect the true opinions of the typical payday borrower.” “There’s nothing wrong with writing to the government, said David Rothstein, a former advocate for non-predatory resources at Neighborhood Housing Services of Greater Cleveland and now a principal at the Cities for Financial Empowerment Fund. That is, ‘as long as the customers and clients know what they’re writing about and what they’re asking for,’ he said. In this case, however, the payday lenders are ‘providing the pen and paper and, let’s not forget, providing the cash for the loan.’ This suggests that the letter-writing involves an element of coercion or pressure, directly or implied. Rothstein called it ‘disingenuous’ for the lenders to boast that the letters reflect the true opinions of the typical payday borrower.”[Stephen Koff, “Payday lenders get thousands of borrowers to complain to government about rules meant to protect them,” Cleveland.com, 08/22/16]
- The Payday Industry Planned to Bombard the CFPB with Hundreds of Thousands of Comments to Bog Down the Agency and Delay the Payday Rule.
- At its 2016 annual meeting, the Community Financial Services Association of America (CFSA) “plotted to bombard the” CFPB with “hundreds of thousands” of comments before the deadline on the payday rule. In March 2016, at the “annual meeting of the Community Financial Services Association of America (CFSA), the payday lending industry’s trade group,” “the industry plotted to bombard the Consumer Bureau with comments and studies suggesting regular people would be the real losers—even if their own oversized profits were obviously the focal point.” Payday industry “leaders stressed the need to deliver hundreds of thousands of such comments before the deadline on the payday rule, which is [October 7, 2016]. They suggested getting employees, landlords, suppliers, bankers, neighbors, state and local politicians, and even pastors to write letters.” [David Dayen, “How Predatory Payday Lenders Plot To Fight Government Regulation,” Vice News, 08/18/16]
- At the same gathering, the existence of “a team of three full-time writers” that could assist with letter-writing was announced by a corporate defense firm. Tony Dias of corporate defense firm Jones Day “asked lenders to ‘get every customer that comes into your store… to write out a handwritten letter and tell the bureau why they use the product, how they use the product, and why this will be a detriment to their financial stability.’” Dias said his office would “‘have a team of three full-time writers’” to assist them. [David Dayen, “How Predatory Payday Lenders Plot To Fight Government Regulation,” Vice News, 08/18/16]
- Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), said that one goal of getting customers to submit comments was to bog down the CFPB and delay the payday lending rule. Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), the payday lending industry’s trade group, said that, if the CFPB “has to wade through hundreds of thousands of comments—from homeowners to political officials and academics—to which they must respond, ‘then they are necessarily bogged down.’” He added, “‘If the rule is delayed, operators are still continuing to be in existence and presumptively to make a profit.’” [David Dayen, “How Predatory Payday Lenders Plot To Fight Government Regulation,” Vice News, 08/18/16]
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