Consumer Financial Protection Bureau’s (CFPB) Payday Lending Rule in Jeopardy – Shelby Could Vote to Gut Important New Protections
WASHINGTON, D.C. – Today, consumer watchdog organization Allied Progress released a chilling new report detailing how Senator Richard Shelby (R-AL) and fifteen other U.S. Senators and Representatives took thousands of dollars in campaign contributions from payday lenders within days of taking official actions to benefit the industry. The suspicious timing of these contributions and actions taken raise serious questions of a potential quid pro quo as Sen. Shelby considers whether he will vote to repeal the Consumer Financial Protection Bureau’s (CFPB) important payday lending rule.
“With a business model that traps millions of hardworking Americans in seemingly endless cycles of debt each year, it is hardly surprising that polls show payday lenders are almost universally despised. What is surprising – even bizarre – is seeing Sen. Shelby tripping all over himself to help such an unpopular and unsavory industry,” said Karl Frisch, executive director of Allied Progress.
He continued, “The truth is, payday lenders wield tremendous power not only over the consumers they are able to ensnare with their risky financial products, but also over Sen. Shelby and other powerful D.C. politicians. Tens of thousands of dollars in suspiciously timed campaign contributions that coincide with official actions by Shelby and his colleagues to benefit the payday lending industry casts a shadow of serious impropriety that must be investigated.”
“To call the timing of these contributions ‘mysterious,’ ‘coincidental,’ or even ‘innocent,’ is to ignore reality: in Washington, nothing happens by chance—campaign contributions least of all. Conversations always happen, whether in person at high-dollar, private fundraisers, or during Capitol Hill’s most frequent activity: call time. Shelby should be ashamed of himself – his constituents deserve and expect better,” he concluded.
Sen. Shelby is prominently featured in “Payday Puppets: How More Than A Dozen Members of the U.S. House and Senate Were Showered with Thousands of Dollars in Campaign Cash by Payday Lenders Within Days of Taking Official Action to Benefit the Industry,” along with Sens. Mike Crapo (R-ID), Pat Toomey (R-PA), Tim Scott (R-SC) and Reps. Alcee Hastings (D-FL), Jeb Hensarling (R-TX), Will Hurd (R-TX), Blaine Luetkemeyer (R-MO), Patrick McHenry (R-NC), Gregory Meeks (D-NY), Steve Pearce (R-NM), Bruce Poliquin (R-ME), Ed Royce (R-CA), Pete Sessions (R-TX), Steve Stivers (R-OH), and Kevin Yoder (R-KS). Former Rep. and current CFPB “Acting Director” Mick Mulvaney also appears in the report as a “dishonorable mention.”
From the Report:
- Shelby received over $50,000 in campaign contributions from the payday lending industry surrounding a vote against an amendment that sought to ensure the Consumer Financial Protection Bureau (CFPB) had “the authority and autonomy to protect consumers from predatory lending.”
More Background on Payday Lending:
Payday lenders trap 12 million Americans in difficult to escape cycles of debt each year with interest rates as high as 400 percent—all while raking in $46 billion annually. When Congress created the CFPB in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, it charged the bureau with overseeing the payday lending industry, among other responsibilities. The CFPB detailed the damage caused by payday lenders, finding:
- Only 15% of payday loan borrowers are able to repay their loans on time. The remaining 85% either default or take out a new loan to cover old loan(s).
- More than 80% of payday loan borrowers rolled over (renewed) their loans into another loan within two weeks.
- More than one-in-five new payday loans end up costing the borrower more in fees than the total amount actually borrowed.
- Half of all payday loans are borrowed as part of a sequence of at least ten loans in a row.
It is findings like these that propelled the CFPB to carefully consider over a number of years and eventually promulgate a tough new rule designed to protect consumers from payday lending industry-induced debt cycles. It’s no surprise that research from The Pew Charitable Trusts found Americans favor more regulation of the payday lending industry by a margin of 3-to-1. Yet, these important safeguards are now under attack by payday industry-backed politicians in Congress and CFPB “Acting Director” Mulvaney who took more than $60,000 in campaign cash from payday lenders before his legally dubious installation by President Trump in November.
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