Trump smashes Obama-era payday lending rule, letting predatory lenders cash in on COVID-19 crisis
Trump smashes Obama-era payday lending rule, letting predatory lenders cash in on COVID-19 crisis
Jul 08, 2020 9:55pm Eastern Daylight Time
by Joan McCarter, Daily Kos Staff
https://m.dailykos.com/stories/1958929
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How on-brand can the Trump team get? They are again letting payday lenders be as predatory as they want to be, lending to consumers at ridiculous interest rates—sometimes as high as several hundred percent—without verifying that the borrower has the ability to repay the loan. The Obama-era rule revoked Tuesday was intended to prevent borrowers from getting into inescapable debt, and to make sure that borrowers would be able to meet other living expenses while covering the loan repayments.
The move was blasted by Sen. Sherrod Brown, the ranking Democrat on the Senate Banking Committee. "Last October we learned that, in exchange for contributions to the Trump campaign, payday lenders were bragging about being able to 'pick up the phone and […] get the president's attention' to fend off regulation. Today, the CFPB gave payday lenders exactly what they paid for by gutting a rule that would have protected American families from predatory loans that trap them in cycles of debt," Brown said. "This new rule—and recent reports that political appointees manipulated research to support the new rule—show just how far the CFPB under Director Kraninger will go to protect President Trump's corporate cronies instead of consumers."
The "ability to repay" requirement was a process similar to what banks have to conduct to determine credit card limits and to underwrite mortgages, limiting what a customer can borrow to what they could afford. Those requirements are now gone, in the name of giving consumers "access to credit from a competitive marketplace," according to CFPB director Kathy Kraninger. At least the administration didn't revoke another part of the rule that prohibits lenders from making three attempts at taking money out of borrowers' accounts, if two consecutive attempts at withdrawals failed.
The move is particularly problematic now, as the coronavirus crisis deepens. Congress—and particularly Majority Leader Mitch McConnell's Republican Senate—have failed to provide many families with enough of a backstop to survive financially, particularly in the longer-term. Charla Rios, a researcher at the Washington-based consumer advocate group Center for Responsible Lending, pointed out that the economic crisis will likely lead to greater demand for small-dollar and payday lending. The CFPB's rule change can and will actively cause harm to consumers during the crisis. "Families need the CFPB to instead work to ensure that they are treated fairly by enforcing the common sense rule that payday lenders should make loans that borrowers can reasonably afford to repay," Rios said.
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