By Sylvia Chi
Action deadline: May 15, 2019, 9 PM Pacific time – GET CASH NOW! The payday lending industry is getting its money’s worth from the Trump Administration: after they invested heavily in Trump’s inauguration and re-election committees, as well as Republican lawmakers and organizations, the Consumer Financial Protection Bureau (CFPB) has announced its plans to reverse an Obama Administration rule to protect borrowers from predatory, short-term, “small-dollar” loans. The industry, which targets low-income and minority communities, is also enjoying the pay-off from relocating its annual conference to the Trump National Doral Miami and influencing academic research in their favor.
On February 14, the CFPB unveiled its proposal to rescind the 2017 payday lending rule, which would have required lenders to confirm that customers would be able to pay back their loans, thus protecting borrowers from predatory lending. Reversing the rule means that payday lenders will be able to make loans with typical interest rates as high as 400 percent, without checking whether borrowers have the ability to pay off the loans’ high interest rates and fees. The biggest irony? The CFPB itself was created thanks to Sen. Elizabeth Warren as a way to protect borrowers – not industry.
You can help stop this reversal from going into effect! Keep reading for instructions on how to submit comments opposing the deregulation of payday lenders and more background on the CFPB’s proposal.
What you can do:
Submit a public comment about the CFPB’s rollback by May 15, 2019. Go to this link and click on the blue “Comment Now!” button in the upper right. Or navigate to www.regulations.gov and search for CFPB-2019-0006.
What to write:
Here are some suggested comments, based in part on the Center for Responsible Lending’s overview and initial analysis. Please personalize your submission as much as possible to make it more effective. Especially effective: share any personal experiences you have about the harms of payday loans or the debt trap. Submit your comments by 9 PM Pacific time on Weds. May 15, 2019.
Be sure to include reference to Docket No. CFPB-2019-0006.
My name is _____, and I am writing in reference to Docket No. CFPB-2019-0006. I oppose the proposed rulemaking for the following reasons:
- Rescinding the “ability to pay” confirmation requirements would make it easier for predatory lenders to coerce borrowers into an inescapable debt trap.
- Getting trapped in a “debt cycle” from payday and similar loans causes substantial injury to borrowers.
- The evidence that supports the 2017 rule’s key findings is sufficiently robust, reliable, and representative, and there is no evidence to support rescinding the rule.
- CFPB’s mission is to ensure that consumers may access fair and transparent markets for financial products, not to increase revenues for payday lenders.
- CFPB should not weaken its interpretation of legal standards for “unfairness” and “abusiveness.” The new interpretations proposed here would make it harder for CFPB to protect borrowers and ensure fairness in the marketplace.
The 2017 rule applied to loans with a term of 45 days or less, longer-term “balloon-payment” loans, and single-payment vehicle title loans, in which borrowers put up their own cars or trucks as collateral. The CFPB previously concluded that as many as four out of five payday borrowers either default or renew their loan because they cannot afford to pay off the loan. The 2017 rule, which was originally slated to go into effect in August 2019, was finalized after five years of research, data collection, and public feedback, and was intended to protect low-income borrowers from getting trapped in a “cycle of debt.”
How does the CFPB justify this proposed rollback? Critically, CFPB does not dispute that payday loan-caused “debt traps” result in substantial injury to borrowers, although they do cite concerns that the 2017 rule might cause a lower number of payday loans, less revenue for lenders, decreased access to credit for borrowers, and reduced consumer choice and competition among lenders. Nor do they claim that the evidence relied on in developing the 2017 rule is so insufficient that the rule would fail judicial review under the Administrative Procedure Act. Instead, CFPB claims that it is “prudent,” as a matter of policy, to hold the 2017 rulemaking to a higher standard, suggesting that evidence must meet an unspecified level of “robustness,” “representativeness,” and “reliability.” But although they claim that the evidence relied on in developing the 2017 rule is now “not sufficiently robust and reliable” to support the identification of “unfair and abusive” practices, they decline to investigate further or to offer evidence that rescinding the rule would not be “unfair and abusive” to borrowers. Instead, CFPB is re-interpreting its legal authority to weaken its standards for what practices count as “unfair” or “abusive.”
The new proposed rollbacks also delay the rule’s implementation date from August 2019 to November 2020, and remove related underwriting and reporting requirements that apply to payday and related lenders.
Sylvia Chi is an attorney and activist in Oakland, with expertise on environment and energy issues.