Democratic senators on Monday demanded that CFPB Director Kathy Kraninger abandon efforts to overhaul the agency’s controversial payday lending rule, contending that political appointees exerted improper influence in the process.
In a letter to Kraninger, Democrats on the Senate Banking Committee cited a New York Times story that alleged that political appointees manipulated the process in an attempt to ensure that the agency’s payday loan rule would be repealed.
That story, published last week, included a memo written by an agency career economist last summer. In the memo, the economist, Jonathan Lanning, provided details alleging that political appointees who had taken office during the Trump Administration tried to water down the rule.
The memo contends that “political appointees exerted improper influence, manipulated or misinterpreted economic research and overruled career staff to support a predetermined outcome,” the senators wrote in their letter.
During the Obama Administration, then-CFPB Director Richard Cordray issued a rule that attempted to rein in the storefront payday lending industry. At the time, Cordray said the lenders charged large fees and established huge interest rates that locked consumers into a cycle of debt. The Cordray rule included provisions that required lenders to make sure a borrower could repay the loan before it was approved.
When Cordray resigned from the agency, President Trump appointed then-Office of Management and Budget Director Mick Mulvaney as the acting director. Mulvaney immediately made it clear he did not support Cordray’s rule and wanted to repeal large parts of it. When Kraninger took office, she continued that effort. A final revision of the Cordray rule is expected any day.
The Democratic senators said that if the memo is correct, the agency had ignored the Administrative Procedures Act that establishes the process by which rules are supposed to be written. They said that if Kraninger wants to change the rule, she should start the process over again. “Your failure to do so not only calls into question the integrity of the rulemaking process, but also could result in grievous harm to consumers,” they wrote.