Category Archive: Fair Lending and Enforcement

  1. CFPB Finally Moves to Reconsider Payday Rule

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    The Consumer Financial Protection Bureau (CFPB) recently supported a motion for reconsideration of the “payday rule,” putting one of Richard Cordray’s most onerous mandates on the chopping block. Mick Mulvaney’s CFPB described the rule as “arbitrary and capricious.”

    They’re right to reconsider it. The “payday rule” would impose burdensome regulations on short-term lenders and make it more difficult for low-income Americans to secure credit on short notice. The mandate would require payday lenders to verify a borrower’s income, major financial obligations, loan history, and other information before providing cash, slowing down the transaction process and reducing the number of loans issued.

    For years, Cordray’s CFPB misled consumers about payday interest rates to undermine the short-term loan industry. A two-week payday loan of $100 generally carries a $15 finance fee, which makes sense given that payday borrowers often bring riskier credit histories to the table. The quick turnaround of payday loans also explains the $15 fee, but the CFPB long equated it to “an annual percentage rate (APR) of almost 400 percent.” This, according to Cordray and other liberals, leaves borrowers in a vicious “debt trap.”

    Which also isn’t true. A 2009 study from Clemson University found that an increase in the payday lending does not lead to a higher rate of bankruptcy.

    Restricting access to credit is the wrong way to go. Nearly 60 percent of Americans can’t cover a $500 unexpected expense. Mulvaney’s CFPB is right to stick up for them.