After months of public pressure and a stiff primary challenge from her left, Democratic National Committee chairwoman Rep. Debbie Wasserman Schultz (D-FL) reversed her position on payday lending Thursday.
Hours after the Consumer Financial Protection Bureau (CFPB) unveiled first-ever federal rules for the loans on Thursday, Wasserman Schultz issued a written statement praising the agency’s work on Facebook. “I stand with the CFPB in its efforts to protect Americans from predatory lending,” she wrote. “After reviewing the proposed rule, it is clear to me that the CFPB strikes the right balance and I look forward to working with my constituents and consumer groups as the CFPB works towards a final rule.”
Wasserman Schultz has been a close ally of the predatory industry for years, dating back to her time in the Florida statehouse around the turn of the century. But it wasn’t until this spring, when the official leader of the Democratic party used her heft within the caucus to urge other Democrats to help ensure payday lenders could evade regulation nationwide, that her long advocacy for 400 percent interest rates and endless debt traps for the working poor became a political liability.
In December, Wasserman Schultz signed onto legislation that would have cut up the CFPB’s rules before they were even issued. The influential Democrat went further, circulating a memo urging other House Democrats to support that same bill.
The premise of H.R. 4018 was that the CFPB rules should not be allowed to trump existing state legislation. Leading proponents of the bill argued repeatedly that Florida’s own payday lending law was a “gold standard” for regulating payday lending. It is nothing of the sort, as the data about consumer outcomes in Florida proves. Borrowers face average costs twice as high in Florida as in Colorado, where rules are more strict but payday lending is still allowed. Floridians face an average annual interest rate of 304 percent, compared to 121 percent since Colorado’s reforms.
Wasserman Schultz’s Thursday statement tried to bury her very recent history of seeking to pre-empt the CFPB’s rules. “From the outset of this process, I have said that I trust the CFPB to do what’s right for consumers,” the statement says.
As of Friday afternoon, Wasserman Schultz is still a co-sponsor of the legislation that was explicitly premised on the idea that the CFPB rules would be less good for consumers than Florida’s law. While the law has not moved in committee and is likely functionally dead, it could still theoretically be revived late this year as part of widely anticipated Republican attacks on the agency and the rules. The chairwoman’s office did not respond to requests for comment.
Between her work on H.R. 4018 and her tens of thousands of dollars in campaign donations from the payday lending industry, the six-term House veteran has been feeling the heat back home. TV and billboard advertising labeled her “Debt Trap Debbie.”
Bernie Sanders helped raise money for Tim Canova, who is the first primary challenger Wasserman Schultz has ever faced. Canova faces long odds of unseating the powerful chairwoman. But he’s won high-profile union endorsements, and Sanders’ fundraising support has given him a large campaign war chest.
Prominent progressive Sen. Elizabeth Warren (D-MA) also appeared to take shots at the Chairwoman, both when the news of her support for H.R. 4018 broke and when the CFPB rules dropped Thursday.
Payday lending is a $7B/yr industry. That buys a lot of influence in Congress – not just with the GOP, but also some Democrats.
— Elizabeth Warren (@SenWarren) June 2, 2016
The rules CFPB laid out Thursday stop well short of what consumer advocates had hoped for, and prompted especially fervent criticism from the Pew Charitable Trusts research team that has been working on predatory lending for years. While the rules would provide the first-ever nationwide framework for curbing payday loan abuses, the current shape of the rules leaves significant loopholes for the industry to continue squeezing the poor.
The industry is still publicly scornful of the rules. But they have already won a better deal from the agency than most observers anticipated.