Consumer watchdog considering repeal of payday lending rule

Ken Sweet | Associated Press

Show Caption Hide Caption Feds to clampdown on payday loan 'debt trap' Federal regulators are proposing a significant clampdown on payday lenders and other providers of high-interest loans, saying borrowers need to be protected from practices that wind up turning into "debt traps" for many. Yet some consumer advocates s

NEW YORK — The Consumer Financial Protection Bureau has decided to reconsider a key set of rules enacted last year that would have protected consumers against harmful payday lenders.

The bureau, which came under control of the Trump administration late last year, said in a statement Tuesday that it plans to take a second look at the payday lending rules. While the bureau did not submit a proposal to repeal the rules outright, the statement opens the door for the bureau to start the process of revising or even repealing the regulations.

The cornerstone of the rules enacted last year would have been that lenders must determine, before giving a loan, whether a borrower can afford to repay it in full with interest within 30 days.

If allowed to go into effect, the rule would have had a substantial negative impact on the payday lending industry. When they finalized their rules last year, the bureau estimated that loan volume in the payday lending industry could fall by roughly two-thirds. The industry, which operates more than 16,000 stores in 35 states, would likely see thousands of payday lending store closures nationwide. But most of these rules would not have gone into effect until August 2019.

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Since Obama-appointee Richard Cordray stepped down as director in November, the Trump administration has been moving quickly to clamp down on the bureau’s activities. The bureau is now under the control of Mick Mulvaney, also the White House’s budget director, who has called the bureau a “sick joke” in comments before he took this job.

A CFPB spokesman referred questions about what the bureau plans to do with the payday lending rule to the White House, which did not respond to requests for comment.