The payday lending arena could get help from the Consumer Financial Protection Bureau (CFPB), with acting director Mick Mulvaney saying the CFPB will “reconsider” rules regarding the industry.
According to a report in Washington Examiner, Mulvaney said in a statement that: “The bureau intends to engage in a rulemaking process so that the bureau may reconsider the payday rule.”
In October, former CFPB head Richard Cordray finalized the rule that would require lenders to conduct background checks showing that borrowers can afford the loans and to limit the number of loans made to a single borrower. That rule has received a lot of pushback from payday lenders, which contend that it prohibits them from issuing almost all of the loans they currently grant to consumers. As the rule is reconsidered, the CFPB has said it would consider giving waivers to companies that want to avoid the earliest deadlines it set forth.
Payday and short-term lending is an approximately $6 billion-a-year industry, one that both critics and supporters of payday lending agree will take a major hit if the CFPB’s proposed rules went through.
In response to Mulvaney’s comment, the Consumer Bankers Association (CBA) issued a statement applauding the acting CFPB director. “The CFPB’s decision to revisit its small-dollar rule is welcomed news for the millions of American consumers experiencing financial hardship and in need of small-dollar credit,” said CBA President & CEO Richard Hunt.
“Under the current rule, many banks are forced to sit on the sidelines and [are] prevented from offering affordable and popular small-dollar credit options to help meet the needs of their customers,” he continued. “As the CFPB reconsiders this rule, we encourage the Bureau to work with bank regulatory agencies to examine the use of bank-offered small-dollar lending products, such as deposit advance products, and ensure [that] any final rule treats all banks equally.”
Small-Dollar Fact Sheets
Mulvaney’s comments come at a time when he is under fire by Senator Elizabeth Warren over limits placed on staff members to access or acquire digital data. Shortly after Mulvaney was appointed acting director by President Donald Trump, Mulvaney instituted a freeze on the collection of any personal data by the CFPB staff, due to security issues that were highlighted in reports from the Federal Reserve and the CFPB inspector general. But as Senator Warren argued in a letter to Mulvaney earlier in January – as reported by American Banker – the inability to collect data impaired the staff members’ abilities to do their jobs.
“The CFPB cannot fulfill its core functions without collecting personally identifiable information,” Warren stated in the letter. “Given how integral these data are to these basic CFPB functions, I fear that the freeze in data collection has in practice fundamentally changed how the CFPB interacts with its regulated entities, particularly in the Division of Supervision, Enforcement and Fair Lending. My staff has obtained internal CFPB documents that confirm these fears.”