Keep industry insiders out of the payday loan rulemaking process
The Consumer Financial Protection Bureau (CFPB) has been an effective watchdog for consumers. However, since President Trump was elected, it has increasingly been protecting financial predators rather than financial consumers.
The CFPB’s recent announcement that it was overhauling the payday lending rule is the latest example of that transformation. Better Markets recently detailed how the CFPB’s proposal would create a debtors’ prison without bars for millions of Americans who were trapped in an endless cycle of payday loans that they could not repay.
That’s because, as the CFPB admitted, two-thirds of payday lender customers could not afford to repay the loan when they received it.
Thus, as the CFPB also admitted, if the “ability to repay” test was not eliminated as it is proposing, then nine out of every 10 payday loan storefronts would shut down. In other words, the CFPB is protecting financial predators, not victimized consumers.
Making all that worse, however, are the recent explosive revelations that the CFPB process that lead to that proposal was allegedly corrupted by concealed industry influence and CFPB lies, as detailed by two recent exposes.
The stories allege that the payday loan industry secretly influenced the CFPB both in undisclosed meetings that the CFPB lied about and by concealing industry funding of and influence over supposedly independent academic research, which was submitted to the CFPB in connection with their proposal to gut the rule.
First, The Washington Post’s Renae Merle wrote a devastating examination that revealed the head of the Short-Term Loan Bar Association, Hilary Miller, hand-picked a university professor in Georgia to write a paper rebutting a key criticism of the industry: that borrowers are harmed by taking out repeated loans.
According to Merle, the payday lending industry provided funding for the paper and the specific data sets the professor analyzed.