The Consumer Financial Protection Bureau yesterday issued its long-awaited updated payday lending rule, excluding a key provision that was included when it was originally released under former Director Richard Cordray, and unleashing a torrent of criticisms from consumer advocates, who are calling for current Director Kathleen Kraninger to resign.
Cordray himself had some harsh words for the “leadership” of the CFPB.
The “heart” that Cordray is referring to is a provision that would have required payday lenders assess the ability of an individual to repay a loan prior to its origination, which was part of the rule when it was originally released by Cordray’s CFPB in 2017. That provision was not part of the new rule, released by the CFPB yesterday and scheduled to go into effect 90 days after the rule is published in the Federal Register, which should happen within the next few days.
“It is truly shocking that the CFPB, an agency created to protect families from financial abuses, is bending over backwards to side with the most scurrilous lenders over the consumers it is supposed to protect,’ said Margot Saunders, a senior counsel at the National Consumer Law Center.
Published reports indicate that consumer advocates will sue to the CFPB in an attempt to block the rule from going into effect.
Jeremy Funk, a spokesperson for Allied Progress, said that Kraninger should “step aside,” adding “Kathy Kraninger should step through the revolving door already and take whatever high-paying industry job she’s been auditioning for ever since assuming this role.”
The new rule is projected to save the payday lending industry $7 billion a year, according to a published report. Earlier this year, a report in The New York Times accused the CFPB of manipulating research to justify is changes to the payday lending rule.
“We are encouraged by the Bureau’s new approach that more appropriately balances consumer protection with access to credit, and look forward to working with regulators to ensure that the voices of Americans seeking access to legal, licensed small-dollar loans continue to be prioritized in any rulemaking going forward,” said D. Lynn DeVault, chairman of the Community Financial Services Association of America, a trade group representing payday lenders, in a statement.
To help consumers, the CFPB said it is launching a research project focused “on identifying information that could be disclosed to consumers during the small dollar lending process to allow them to make the most informed choices.”
Said Kraninger, in a statement: “Our actions today ensure that consumers have access to credit from a competitive marketplace, have the best information to make informed financial decisions, and retain key protections without hindering that access. The Bureau protects consumers from unfair, deceptive, or abusive practices and takes action against companies that break the law. We will continue to monitor the small dollar lending industry and enforce the law against bad actors.”
