The Consumer Financial Protection Bureau is under a new regime, one dubbed by the St. Louis Post Dispatch the Consumer Financial Destruction Bureau in an editorial. This is nowhere more evident than in the bureau’s actions last week to break its commitment to the public to rein in predatory payday and car title loans.
First, the Consumer Bureau also signaled its plan to “reconsider the payday rule” it issued late last year. The rule, which contains protections for loan borrowers that had been some five years in the making, had been lauded by community groups as a powerful step away from a business model that catches consumers in a debt trap. With Mick Mulvaney’s new announcement, many in the press and the public see an attempt to torpedo most of the protections that will otherwise go into effect in 2019.
The Cooperative Baptist Fellowship, a longtime proponent of protections for payday loan borrowers, had this to say in a statement:
“This decision to reconsider the new payday lending rule is extremely disappointing and worrisome,” said Reeves, who serves as associate coordinator of partnerships and advocacy for the Cooperative Baptist Fellowship. “The process of studying the impact of payday and car-title loans, hearing from the public, including faith leaders, and considering draft language took over five years. I cannot imagine a single legitimate reason to go back and undo this good work.
Other groups responded harshly as well, including the Indiana Assets & Opportunity Network, Maine People’s Alliance, the North Dakota Economic Security & Prosperity Alliance, and Tennessee Citizen Action, among others. There was widespread public outcry on twitter as well, as groups from West Virginia and Delaware all the way to Nevada and Arizona vowed to push back against any attack on the new protections.
The Consumer Bureau also announced that it dropped a case against four online lenders which illegally made loans in seventeen states, with annualized interest rates ranging from 440% to 950%. While they alleged that they were tribal lenders, they were run by people outside of the tribes, and courts have already ruled that state usury laws still have jurisdiction in the states where borrowers are given the loans.
This comes just months after high profile criminal cases landed millionaires Scott Tucker and Charles Hallinan in prison after illegal online lending with attempts to hide behind alleged tribal connections. Tucker will be featured in the Netflix documentary series Dirty Money this weekend after a trial where it was found that he bought a fleet of race cars on the backs of scammed borrowers.
In 2016, one of Hallinan’s partners published a letter in the industry paper Cheklist cautioning other payday lenders away from offering illegal loans under the cover of alleged tribal connections. His caution signals the strength of state usury laws, but as with any law, they don’t help consumers if the enforcement authorities choose to be asleep at the wheel.
In response to the move to give payday lenders a pass, outrage could be heard in congress as well, as Representative Maxine Waters quickly called out . Other members of congress spoke out against the move as well, including Senators Sherrod Brown, Jeff Merkley, Richard Blumenthal, Catherine Cortez Masto, Mark Warner, and Gary Peters, as well as Representatives Suzanne Bonamici and Steve Cohen.
Other groups to issue responses included the Stop The Debt Trap Coalition, as well as many members of the coalition, including the Center for Responsible Lending, the Consumer Federation of America, Allied Progress, National Consumer Law Center, and Prosperity Now.