Washington D.C. – 22 million American jobs have disappeared in just four weeks amid a historic public health crisis. It’s an economic environment ripe for financial scams and predatory industry practices. But that’s somehow not cause enough for Trump CFPB Director Kathy Kraninger to reevaluate her priorities and start putting consumers first. Instead, Kraninger is pressing forward with her plans to leave consumers even more vulnerable to financial abuse, at the worst possible time. According to the American Banker, the Consumer Financial Protection Bureau is “moving forward with its payday lending rule” that is expected to permanently scrap the ability-to-repay standard, one of the strongest protections against the payday loan debt trap.
Not stopping there, the bureau is reportedly already preparing to deliver another top agenda item for the payday industry that gave over $2 million to Donald Trump and spent another $1 million holding ritzy conferences at the Trump Doral golf resort. The agency is now expected to consider a new rule to do away with provisions that limit the amount of automatic withdrawal attempts a lender can make on a borrower’s bank account. Without these protections in place, consumers could be socked with excessive fees that compile with daily withdrawal attempts, “both late fees from the payday lender and overdraft fees from the bank.”
“Not even a pandemic and looming recession can keep Director Kraninger from empowering predatory lenders to rip off vulnerable consumers,” said Jeremy Funk, spokesman for consumer watchdog Allied Progress. “The Director should be using every resource at her disposal to shut down financial fraudsters that thrive in economic downturns like this. Instead, she’s busy crossing off wish list items for greedy industries that have given her boss millions of dollars, just like she’s done any other day on the job.”
Last year, Allied Progress helped bring to light damning video of Mike Hodges, the CEO of major payday lender Advance Financial, bragging that the millions of dollars he helped raise for Donald Trump’s reelection campaign had given him pull with the administration and that he had been led to believe bringing in new payday industry donors would result in CFPB rules favorable to his industry – including a roll back on the payday rule’s Payment Provisions.
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 contributed millions of dollars to Donald Trump. Kraninger’s decision to delay common sense protections against the worst payday industry practices has already cost consumers over $4.4 billion in abusive fees and penalties. The Trump CFPB has even 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.