Payday Lending Spree in the Backyard of CFPB “Acting Director” Mick Mulvaney
Demonstrating Need for Strong Federal Rule, Payday Lenders Bend Over Backward to Avoid Regulations in Mulvaney’s Home State of South Carolina
WASHINGTON, D.C. – While OMB Director Mick Mulvaney undermines the Consumer Financial Protection Bureau (CFPB) from Washington, D.C., payday lenders in his home state of South Carolina continue to successfully bypass state laws to avoid regulations demonstrating the importance of the CFPB’s tough new rule reining in the worst abuses of the predatory industry.
In 2010, state lawmakers limited the number of payday loans a person can take out and capped the amount at $550. To bypass the regulations, payday lenders traded in their licenses for “supervised” lending, a category without the same level of scrutiny. Shortly after the payday lending law went into effect, nearly 100 payday lenders in South Carolina were re-licensed as supervised lenders, thus becoming exempt from the new state regulations.
Mulvaney, who criticized the CFPB’s payday lending rule when he was a South Carolina Congressman, received $31,700 from payday lenders during his last term in Congress alone. While he denies any bias this may create against the payday lending rule now under his purview at the CFPB, he has endorsed a Congressional Review Act (CRA) resolution to repeal the important rule, telling USA Today, “I would support the Congress moving forward on the CRA.”
“South Carolina is one of the best examples of how payday lenders avoid accountability and continue to prey on consumers at the state level and why it is so important to have tough national rules like the ones put forward by the CFPB. It’s no surprise that South Carolina’s very own Mick Mulvaney is in no rush to enforce the CFPB’s common-sense payday lending rule – he’s been showered with tens of thousands of dollars from payday lenders throughout his career,” said Karl Frisch, executive director of Allied Progress.
Additional background on payday lending in South Carolina
Payday Lenders in South Carolina Bypassed State Laws That Limited the Number of Payday Loans a Person Can Take out and Loans Amounts to $550 by Operating in a Category Called “supervised” Lending Which Are Not Subject to Regulations.
“State lawmakers passed restrictions last May designed to protect borrowers from getting in over their heads with short-term, high-interest loans. The law limited the number of loans to one at a time and capped the amount at $550. Lenders also are required to check a new online database to ensure that customers have no other outstanding loans. After the law took effect, however, a number of payday lenders traded in their payday loan licenses to offer loans in another category known as “supervised” lending. Supervised lenders are not subject to the same limitations as payday lenders. They can set the length of the loan and the interest rate, and customers do not go into the database.” [Editorial, The Herald (Rock Hill, SC), 3/2/10]
After The South Carolina Payday Lending Law Went Into Effect, Payday Lending Loan Balance Dropped 10% But “Supervised Lender” Loan Balances Increased 30%.
“The company is not alone. The state Board of Financial Institutions says 99 of the 245 payday lenders that discontinued their licenses in 2009 applied for a supervised license so they could make short-term unsecured loans that don’t have the same restrictions as payday loans. That translated into about a 10 percent drop in payday loan balances that year and a nearly 30 percent increase in loans made by supervised lenders.” [AP, 12/23/10]
Nearly 100 Payday Lenders In South Carolina Were Re-Licensed To Supervised Lenders Shortly After The Payday Lending Law Went Into Effect.
“But payday lenders are skirting the database mandates by re-characterizing their loans, according to senators and advocates for the poor. They accuse companies of handing out payday-type loans under a “supervised” loan license, allowing them to set their own length and interest rate on unchecked debt, because their customers’ names don’t go in a database. “Many in this industry have abused South Carolina citizens who can afford it the very least, stripped the hard-earned dollars from working South Carolinians by setting a serial lending trap, and avoided even the most minor regulations attempting to rein in their addictive and unconscionable practices,” said Sen. Vincent Sheheen, D-Camden, who’s running for governor. About 640 payday lenders currently operate in South Carolina. Nearly 100 others have been re-licensed as supervised lenders, according to the state Board of Financial Institutions.” [AP, 2/16/10]
Find out more about how payday lenders are skirting state regulations across the country.