It seems that a lot of people are unhappy with the revised payday lending rule the Consumer Financial Protection Board issued Tuesday.
Credit union trade groups said the rule should have done more to exempt credit unions.
Consumer groups, on the other hand, said the rule eliminates virtually all consumer protections.
The CFPB on Tuesday rescinded sections of the payday rule that required a lender to verify that borrowers are likely to be able to repay the loans before they are approved. The agency left the sections of the rule governing loan repayment intact. The bureau also exempted from the rule loans modeled after the National Credit Union Administration’s Payment Alternative Loan original loan model.
Credit unions should have received a total exemption from the payday rule, Elizabeth Eurgubian, Credit Union National Association’s deputy chief advocacy officer said. “We’ll continue to engage the Bureau on the impact of the payments provisions and expanding the rule’s payday alternative loan exemption.”
The National Association of Federally-Insured Credit Unions officials did not go as far, saying that the CFPB should have exempted all loans modeled after the current and all future iterations of the PAL program. “We firmly believe that community lenders, such as credit unions, must be allowed to serve consumers while the predatory practices of certain payday lenders must be stopped,” NAFCU President/CEO B. Dan Berger said. “NAFCU will continue to urge the CFPB to exclude all future payday alternative loans made by credit unions from its rulemaking.”
Some credit unions offer payday loans that are not modeled after the PAL program.
During the Obama Administration, then-CFPB Director Richard Cordray issued a strict rule attempting to rein in the payday lending industry, which had been widely criticized by consumer groups and others, who said the loans locked borrowers into a cycle of debt.
Trump Administration officials said they did not agree with Cordray’s rule and intended to revise it. CFPB Director Kathleen Kraninger repealed the underwriting section of the rule Tuesday.
“The bureau’s decision to rescind its 2017 rule ignores the foundational rationale for the rule and fails to refute or reinterpret the bulk of research underpinning it,” said Alex Horowitz, senior research director at the Pew Charitable Trust consumer finance project. “The case the bureau offers for overturning the rule and allowing loans that have a long track record of failing consumers is unsubstantiated.”
Pew officials have conducted research into the payday lending industry. “The 2017 rule was working,” Horowitz said. “Lenders were beginning to make changes even before it formally took effect, safer credit was already starting to flow, and harmful practices were beginning to fade. Today’s action puts all of that at risk.”
Jeremy Funk, spokesman for Allied Progress, a watchdog group that monitors the CFPB’s work, called on Kraninger to resign. “Director Kraninger just stamped an official seal of approval on one of the worst practices of payday lenders — and now there’s nothing stopping the industry from ruining families with 400 percent interest rates in the middle of a recession,” he said
Funk and others called for congressional action to rein in lenders they consider predatory.
“With regulators throwing open the doors to predatory lenders Congress must step in to prevent profiteering and stop payday and car-title lenders from burying people in high-interest debt,” said Linda Jun, senior policy counsel at Americans for Financial Reform.