In what would be a laughable move if it wasn’t so incredibly tragic, the Trump administration’s newly emasculated Consumer Financial Protection Bureau this week sided with payday lenders over consumers.
You heard right. The CFPB, now led by an appointee of a businessman-politician whose companies have gone bankrupt a half-dozen times, has decided to back off from a planned crackdown on one of the financial sector’s most blood-sucking industries.
As if that wasn’t bad enough, the bureau announced Thursday it was requesting no new funds to get things done in the upcoming quarter, as opposed to the $217 million sought for the last three months, before President Trump made his presence felt.
Put it all together, and you get a clear message that consumers increasingly are on their own.
On payday lending, the bureau said in a terse statement it will “reconsider” the first federal rules providing oversight of short-term loans, including car title loans.
This is a nearly $50-billion industry, preying on millions of low-income people living paycheck to paycheck.
Say a customer borrows $400. He or she would be obligated to repay the loan within two weeks, plus $60 in interest and fees — the equivalent of an annual percentage rate of more than 300%.
If the loan can’t be repaid — and all too often it can’t — the borrower’s obligation gets rolled over into a new loan, resulting in a never-ending cycle of high-interest debt.
The Center for Responsible Lending estimates that payday and car-title lenders rake in about $8 billion a year in combined fees from beleaguered borrowers.
Clearly there’s a role for short-term loans in uncertain economic times. The CFPB’s rules were intended to prevent people from falling into inescapable debt traps.
They require lenders to check up front whether borrowers are capable of repaying loans within 30 days and still meet basic living expenses. They also limit how many loans a borrower can receive within a certain time period.
Most of the rules aren’t set to go into effect until August 2019.
But the payday loan industry, sensing the demise of thousands of bottom-feeding lenders if they can no longer keep people on the hook for months or years, wasted no time in lobbying aggressively to keep the CFPB at bay. That lobbying is now paying off.
The bureau’s announcement this week is a first step toward revising or repealing the rules. Odds are good that the CFPB’s payday loan rules will end up in the wastebasket.
Advance America, the country’s largest payday lender, issued a statement saying the CFPB’s move “signals a welcome return to the agency’s central mission of serving as an independent, nonpartisan government agency that protects and empowers consumers and advances evidence-based rulemaking.”
No. It signals the unwelcome prospect of the nation’s top consumer watchdog doing the bidding of business interests, including those whose profits are based on destroying the lives of hardworking people and families.
“President Trump came into office promising to remember the forgotten people that are struggling throughout middle America,” said Christopher Peterson, a senior fellow at the Consumer Federation of America. “Instead, the administration has taken the side of predatory payday lenders that collect triple-digit interest debts from our most vulnerable families.”
Underlining that point, the CFPB also announced Thursday it was dropping a lawsuit against a group of payday lenders that allegedly duped customers by failing to reveal annual interest rates of nearly 1,000%.
The bureau is currently overseen on an interim basis by the White House budget director, Mick Mulvaney, who once called the bureau a “sick, sad joke.” The former director, Richard Cordray, stepped down in November.
As I reported last month, one of the Mulvaney’s first moves was to quietly change the description of the CFPB in the agency’s announcements and press releases.
Before he arrived, the bureau described itself as “a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules.”
Now the bureau says it “helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary or unduly burdensome regulations.”
Apparently rules that prevent predatory lenders from taking advantage of people who are financially vulnerable or unsophisticated fall into the category of “unnecessary or unduly burdensome.”
As for his request for zero additional funds, Mulvaney said the CFPB can make do with leftover cash from the last budget round — basically declaring that the agency has no big plans to, you know, investigate and prosecute any major consumer ripoffs.
And it gets worse.
On Wednesday, the bureau invited businesses to submit their thoughts on whether the agency “is fulfilling its proper and appropriate functions to best protect consumers.” In other words, it wants to know which rules and enforcement practices should be discarded next.
Mulvaney said in a statement that “it is natural for the bureau to critically examine its policies and practices,” and that officials are seeking “constructive feedback” and “ideas for improvement.”
“Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law in a way that guarantees due process,” he said.
Actions speak louder than words. What Mulvaney is really saying on behalf of Trump is that there’s a new consumer sheriff in town, and this sheriff is perfectly content to hang around the saloon and let the town look after itself.