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From Banking and Finance Law Daily, December 4, 2017

Bipartisan bill would block CFPB payday lending regulation

By Stephanie K. Mann, J.D.

Bipartisan legislation has been introduced to nullify a rule that would ban millions of consumers from accessing short-term, small-dollar credit that was issued shortly before former Consumer Financial Protection Bureau Director Richard Cordray left office (see Banking and Finance Law DailyOct. 5, 2017). The bill, under Congressional Review Act authority, would repeal the rule and prevent the Bureau from issuing a similar rule in the future. H.J. Res. 122 was introduced by Rep. Dennis Ross (R-Fla) and co-sponsored by Reps. Alcee Hastings (D-Fla), Tom Graves (R-Ga), Henry Cueller (D-Texas), Steve Stivers (R-Ohio), and Collin Peterson (D-Minn).

Emphasizing that while all 50 states, the District of Columbia, and all Native American tribes already regulate short-term loans, Ross stated that "short-term, small dollar credit is essential to nearly 12 million American consumers who have difficulty qualifying for many other types of credit." In order to help some consumers meet their needs, including unexpected car repair or medical bills, use these loans to bridge an emergency.

Leadership support. House Financial Services Committee Chairman Jeb Hensarling (R-Texas), a supporter of the bipartisan effort, said the CFPB’s rule is an example of how "unelected, unaccountable government bureaucracy hurts working people." Hensarling believes that Americans should be able to choose the checking accounts, mortgages, and short-term loan that they want without government interference.

Industry support.Praising Republican and Democratic leadership for standing up for vulnerable consumers against an "unfair" regulation, Daniel Press, a policy analyst at Competitive Enterprise Institute, said, "If implemented, the rule would leave millions of Americans in a real bind at exactly the time they need a fast loan to cover an urgent expense."

Industry opposition. "Attempts to roll back this protection for consumers are nothing more than a sellout to the predatory payday lenders who want to continue to enrich themselves by trapping people in a painful cycle of debt," said Gynnie Robnett, Campaign Director at Americans for Financial Reform. "Congress should reject this and other attempts by payday lenders to undo a rule based on the common sense principle of ability to repay."

At the heart of the payday lending rule is preventing fewer families from falling into financial ruin, said Yana Miles, Senior Legislative Counsel at the Center for Responsible Lending. The bill would require lenders to determine whether a loan is affordable to the borrower before making it. "The line in the sand is clear—you’re either siding with the payday lenders or you’re siding with consumers. Unfortunately, for these members who introduce this CRA resolution, their allegiance is to the payday lenders."

"This sensible safeguard will help save consumers from getting trapped in a cycle of triple digit interest rate loans rolled over and over again," said Michael Best, Director of Advocacy Outreach at Consumer Federation of America. "We oppose this Congressional effort to gut this important rule." The trade association highlighted statistics from the CFPB’s research which shows that almost 70 percent of borrowers take out a second loan within a month, and one in five borrowers take out 10 loans or more consecutively."

"Americans of all political persuasions should be outraged at the members of Congress who are trying to block modest protections for predatory 300% loans that put families into a debt trap," said Lauren Saunders, associate director of the National Consumer Law Center. "Ordinary people, whether Republican or Democrat, liberal or conservative, support reform of 300% loans that prey on working families living paycheck to paycheck."

Companies: Americans for Financial Reform; Center for Responsible Lending; Competitive Enterprise Institute; Consumer Federation of America; National Consumer law Center

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