The Consumer Financial Protection Bureau spent almost half a decade crafting modest regulations on payday lending that would have brought federal oversight to the usurious industry for the first time. But on Tuesday, acting CFPB Director Mick Mulvaney jerked the watchdog’s leash hard, inviting lenders across the country to apply for waivers from the new rules.
Lenders — many of whom charge annual interest rates in the triple-figures, trapping almost half of all payday loan customers in often-endless cycles of impossible debt — will be able to extend an April deadline for registering with one of the systems established by the agency rule, Mulvaney’s office announced by email Tuesday afternoon.
The deadline waivers are only a curtain-raiser for Mulvaney’s broader scheme for weakening the loansharking rules. Now under new management after a judge sided with the White House and greenlit Mulvaney’s ascent to the interim directorship, the agency “intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule,” the email said. Under the arch-conservative, anti-regulation management of Mulvaney and President Donald Trump, reconsidering the payday rule means shredding it.
Politicians with close campaign fundraising ties to the banking and lending industries have long slandered the payday rule as an attempt to kill small-dollar lending. (It’s been a bipartisan sport for a long time; Rep. Debbie Wasserman Schultz (D-FL) famously ran interference for the industry while serving as head of the Democratic National Committee, for instance, even though the bulk of the industry’s donor dollars targeted Republicans like Mulvaney.)
It would indeed be harmful to millions of low-income families if the kinds of short-term credit these companies offer simply disappeared. Twelve million Americans rely on the loans to cover unexpected costs each year. The egregiously priced loans are often the only option people like Laura McCarty have have to weather a small financial emergency without getting evicted. But the CFPB rule was no killshot. The agency spent years fine-tuning regulations to restrict the terms and rates at which such loans can be marketed — rendering them less profitable and potentially driving some of the most egregiously abusive businesses to close stores, but leaving the possibility of profit open for both small community banking organizations and large lenders.
The final rule was criticized plenty — but most loudly by consumer advocates who said it left companies too much wiggle room to get up to their old tricks. Lenders could choose to comply with either a cap on interest rates or a cap on how many times a given loan could be rolled over — an adaptable system that stops far short of the kind of stringent restrictions on both rollovers and rates that groups like the Pew Charitable Trusts and the Center for Responsible Lending told ThinkProgress they wanted. Absent such reforms, the industry will continue to extract nearly all of its profit from the minority of borrowers who get trapped in endless debt cycles.
If Mulvaney were reopening the door to a stricter final rule, the same advocates might well rejoice. But Mulvaney has publicly supported congressional efforts to override the rule. He took tens of thousands of dollars from the industry during his campaigning years, ranking ninth among Members of Congress in industry contributions during the 2015-16 cycle. And the legal memo undergirding Trump’s push to install him atop CFPB, instead of letting the outgoing director’s second in command ascend to the post, was written by a man with deep personal ties to payday lending firms.
The history of payday lending in the United States is damnably simple. Where states have attempted to regulate the industry, it has spent whatever it takes to get elected representatives to erase or weaken new rules. The CFPB’s independence from Congress made that strategy unworkable at the federal level over the past few years. But now, with an ambitious opponent of financial regulation in charge of the agency and at least one more year of unitary Republican government in Washington, the old playbook is viable again.