The new leadership of the Consumer Financial Protection Bureau has begun the process of potentially unwinding one of the agency’s signature rules aimed at curbing payday lending.
The CFPB is now under the control of White House budget director Mick Mulvaney, who once called the bureau a “sick joke” and is pushing to rescind its most aggressive regulations.
The payday lending rule, which was finalized last year when the bureau was under Obama-era leadership, imposes limits on how frequently a lender can offer, collect on and extend high-interest loans with deadlines of only a few weeks.
But in a statement released earlier this week, the CFPB said it “intends to engage in a rulemaking process so that the bureau may reconsider the payday rule.” It also would allow lenders subject to the measure to ask for a delay in complying with the April 16 deadline for registering with the bureau.
The bureau said it wished to spare lenders the expense of complying with a rule that could be changed by Aug. 19, 2019, when most of its current provisions become effective.
Critics of the rule argue it will devastate an industry serving 30 million customers, many of whom lack access to more traditional forms of credit.
“The CFPB’s decision to revisit its small-dollar rule is welcome news for the millions of American consumers experiencing financial hardship and in need of small-dollar credit,” said Richard Hunt, president and CEO of the Consumer Bankers Association, a trade group for banks.
But the ranking Democrat on the House Financial Services Committee called the move “unacceptable.”
“Republicans are once again giving payday loan sharks a reprieve at the expense of hardworking Americans,” said Rep. Maxine Waters (D-Calif.).
As The Hill reports, payday loans come with interest rates as high as 400%, and borrowers who can’t afford to pay by the deadline are often forced to renew the loan, spiking their total debt to the lender.
House Republicans are also backing a measure to repeal the rule and ban the CFPB from ever issuing a new rule on payday lending.