Wednesday, 13 December, 2017

Finance Industry Divided in Response to CFPB Rule on Small-Dollar Lenders

Consumer protection bureau cracks down on payday lenders with tough nationwide regulations This Government Agency Is Seriously Overstepping Its Bounds
Laurie Berry | 06 October, 2017, 11:52

In addition to the "full payment test" and the limits on loan renewals, the Consumer Financial Protection Bureau rules would also restrict the number of times a payday lender can attempt to debit a borrower's account for the full amount without getting additional authorization.

Republicans have previously objected to payday loan regulation and the new rules may still be overturned by Congress.

Because most borrowers can not repay their debts quickly, the loans are often rolled over, entangling those who take them in hard-to-escape spirals of ever-growing debt. Borrowers pay a median $15 in fees for each $100 they borrow, amounting to an annual percentage rate of 391 percent on a median loan of $350, according to the CFPB. The restrictions, scheduled to go into effect in 2019, are fiercely opposed by those in the industry, who say the measures will force numerous nation's almost 18,000 payday-loan stores out of business.

Payday and auto title lenders will have to adhere to stricter rules that could significantly curtail their business under rules finalized Thursday by a federal regulator.

The CFPB did not take into consideration the needs of consumers who use and like payday loans, said Dennis Shaul, chief executive of the Community Financial Services Association of America, the primary industry group for payday lenders. "(The rules as now written) leave millions of Americans still at-risk to be exposed to triple digit interest loans with little or no evaluation of their ability to pay".

The Consumer Financial Protection Bureau's rules imply that the bureau clearly wants banks and credit unions to take over the small-dollar lending industry.

Obama administration declined to ban bump stocks
Another site that sells the company's products said in a message online that the device is "out of stock" and backordered. Both Illinois senators, Democrats Dick Durbin and Tammy Duckworth, are among the bill's co-sponsors.

"This cycle of piling on new debt to pay back old debt can turn a single unaffordable loan into a long-term debt trap", Cordray said. While the rules are a positive step forward, Peterson believes more must be done to protect consumers. But there is a better, simpler way for the CFPB to go about it, he said, noting that the rule spans 1,600 pages. About 12 million Americans take out such each year, spending more than $7 billion on loan fees, according to Pew Charitable Trusts.

The new guidelines pit the consumer bureau, an independent watchdog created in the aftermath of the financial crisis, against Congress and President Donald Trump, who has made rolling back business regulations a centerpiece of his agenda.

The payday-lending industry is vast.

Unfortunately, the CFPB continually misses the mark, issuing rules that make splashy headlines but in practice do little to stop bad behavior. The group says it will fund an advertising campaign to mobilize consumers to oppose any Congressional roll-back. More than a dozen US banks and business groups sued the agency last week in a last-ditch effort to block another set of rules that make it easier for consumers to band together and sue their credit card companies and other financial institutions. That lawmaker, U.S. Rep. Jeb Hensarling, has voiced frustration with the looming question of what he described as Cordray's "personal political ambitions".

The completion of the payday lending rules will probably add to speculation that Cordray - an appointee of former President Barack Obama - is wrapping up his top priorities in preparation for running for governor as a Democrat in his home state of Ohio.

Hunt, whose organization represents retail banks with over $10 billion in assets, said that the rule would "drive Americans to pawnshops, offshore lenders, high-cost installment lenders and fly-by-night entities". His term doesn't end until next year.

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