The federal Consumer Financial Protection Bureau (CFPB) has eliminated a rule that placed limits on payday lenders, handing a victory to the sector.
In a two-sentence ruling Tuesday (July 7), CFPB Director Kathleen Kraninger rescinded the ability-to-repay underwriting requirements that had been imposed by a 2017 regulation under the Obama administration.
“The Bureau is taking action to ensure that consumers and market participants understand that the same rules continue to govern the consumer financial marketplace,” Kraninger said in a statement.
The Trump administration has worked to eliminate the rule, as well as repeal the prohibition of multiple loans by the same customer.
Consumer protection advocates insist such lenders are predatory and take advantage of vulnerable, low-wage earning Americans.
There are estimates the changes will save these so-called small dollar lenders more than $7 billion annually.
Still, the CFPB noted the new regulation is subject to litigation.
Consumer groups have argued the CFPB failed to follow the correct rulemaking procedures.
The ruling followed a Supreme Court decision last month that the Obama-era agency’s structure is unconstitutional.
At issue in the case was whether the president has the power to remove a CFPB director during the agency chief’s six-year term. When Congress created the agency in 2014, it said a president doesn’t have that power and the director could only be fired for “inefficiency, neglect of duty, or malfeasance in office.”
But the court’s five conservative justices ruled such a provision violates the U.S. Constitution, which says that “the executive power shall be vested in a president of the United States.”