Washington D.C. – In the face of extraordinary economic uncertainty during the COVID-19 health crisis, consumer watchdog group Allied Progress implored the Trump Consumer Financial Protection Bureau to permanently abandon its proposal to kill a key protection against predatory lending, the ability-to-repay standard. The bureau has given no indication it is reconsidering its plan to issue a final payday rule this month. Instead, Director Kathy Kraninger should immediately allow the Obama-era rule to take effect to help keep the most vulnerable Americans from falling into the payday loan debt trap that poses more financial danger to the public than ever before.
“There could not be a worse time for the administration to give predatory lenders an official seal of approval,” said Derek Martin, director of Allied Progress, which recently launched CFPB Watch. “As we enter an economic downturn that could dwarf the Great Recession, the administration should be focused on giving direct emergency assistance to hurting families like additional stimulus checks and greater access to jobless benefits – not pushing more Americans into the clutches of predatory lenders and 400% interest rates. Director Kraninger’s decision to delay common sense protections against the worst payday industry practices has already cost consumers over $4 billion in abusive fees and penalties. It’s time to stop the bleeding.”
BACKGROUND: In her first major action as CFPB Director, Kathy Kraninger unveiled a proposed rule in February 2019 that would scrap the core provision of a regulation on payday and car-title lending that the agency finalized in 2017, the ability-to-repay standard. This protection stops payday lenders in many states from approving high-interest loans – that average nearly 400% APR – to struggling people they know cannot pay them back in time. In August 2019, Kraninger officially delayed the Obama-era regulation from taking effect for 15 months – a gift to the payday loan industry that has given over $2 million to Donald Trump and spent another $1 million holding ritzy conferences at the Trump Doral golf resort. The Trump CFPB has admitted that their payday protection elimination plan is not supported by “any new” academic research and will pad profits of the payday industry by more than $7 billion annually. In contrast, the original Obama-era payday rule that was carefully crafted after 5 years of research and input from the full spectrum of stakeholders.