Contact: Desmond Lee; desmond.lee@berlinrosen.com; 646-517-1826
Courtney Boland; courtney.boland@berlinrosen.com; 646-757-8755
For Immediate Release
October 5, 2018
Predatory lenders and now new CFPB leadership have the rule in their cross-hairs
WASHINGTON, D.C. – Exactly one year ago today, the Consumer Financial Protection Bureau (CFPB) issued a final rule to help stop payday and car-title loans from trapping consumers in debt. Since then, predatory lenders have launched a multi-front attack to kill the rule: in Congress, in the courts, with the new CFPB leadership, and through the Trump Administration.
The Stop The Debt Trap campaign issued the following statement:
The payday rule was a critical step in ending the exploitation of Americans with 300%+ interest rate loans. This usury frequently brings a cascade of harms, including loss of a car, bankruptcy, and delaying needed medical care – while putting the borrower through a living hell.
As head of the CFPB, Mick Mulvaney has thus far sided with the payday loan sharks. We urge him to instead work with a broad coalition of community groups to put an end to predatory, debt trap lending.
Background
More than four out of every five payday loans are re-borrowed within a month.
The payday rule was developed after more than five and half years of research, analysis, and public outreach, as indicated by this interactive timeline. The rule is supported by a majority of Republican, Independent, and Democratic voters and by a broad coalition of civil rights, consumer, labor, faith, veterans, senior, and community groups. At the heart of the rule is the common-sense principle that lenders check a borrower’s ability to repay before issuing a loan.
Over the past year:
- Predatory lenders tried but failed to meet a deadline for Congress to rescind the rule and block promulgation in the future of a similar rule through a Congressional Review Act (CRA) resolution.
- Mick Mulvaney, who has advocated for eliminating the rule through the CRA, has stated that he intends to reopen the rulemaking process and may publish a proposed rule by February 2019 or earlier.
- The industry, led by the Community Financial Services Association of America and the Consumer Service Alliance of Texas, filed a lawsuit to invalidate the rule and prohibit the CFPB from implementing it.
- Mick Mulvaney decided to have the CFPB join the industry in its effort to delay the rule indefinitely. The court rejected this particular effort, but the case is still pending.
- The U.S. Department of the Treasury, in its recent “fintech” report, called for the elimination of the rule.