As part of a move to revise a payday loan regulation from the Obama era, the Trump administration on Wednesday (Feb. 6) revealed a plan to remove a provision that would make it harder for companies to provide customers with high-cost loans, according to a report in The Wall Street Journal.
The rule, which was supposed to go into effect in August, was meant to federally regulate short-term loans geared toward low-income customers. The Consumer Financial Protection Bureau (CFPB) said it will now postpone the rule until Nov. 19, 2020.
It’s an extensive and involved process to revise the rule — the Obama administration spent almost six years doing research and bringing the regulation to fruition. In general, federal procedures that new administrations want to change require new analysis and administrative processes that could take months, and periods for public comment (90 days) to undo. The Trump administration has started the ball rolling.
The payday loan and auto title industries have been lobbying against the regulations for years. They say it would obliterate business by making the companies go through too many requirements to provide proof a customer can repay a loan.
The CFPB said it was worried the underwriting requirements could hinder customers’ access to credit, and competition as well.
“The bureau’s proposal suggests there was insufficient evidence and legal support for the mandatory underwriting provisions in the 2017 final rule,” the CFPB said.
CFPB Director Kathy Kraninger, however, has not “formed any conclusion as to where this will go,” the CFPB said. “She has an open mind and … wants to review the comments that come in.”
Some consumer groups have asked for tougher regulations on payday loans, arguing that the high interest rates force people to keep rolling over loans at unfair costs. The payday loan industry says they provide a necessary service to people who can’t get traditional loans.