Payday loan crackdown on ice under Trump pick who got donations


A consumer agency taken over by an appointee of President Donald Trump who accepted more than $62,000 in contributions from payday lenders while in Congress has suspended rules aimed at stopping what the previous administration called “payday debt traps.”

Florida consumers paid more than $2.5 billion in fees that amounted to an average 278 percent annual interest rate on payday loans over a decade, according to groups calling for tougher regulations.

“Hugely disappointed,” Alice Vickers, director of the nonprofit Florida Alliance for Consumer Protection, said Wednesday. “It seems like a direct gift to the industry. Hard to interpret it any other way.”

The move announced by the Consumer Financial Protection Bureau a day earlier represented welcome relief for an industry that insisted the previous regime went too far.

Lender groups have fought against the rule they slam as a prime example of over-stepping by the CFPB, the consumer agency created by financial reform laws passed during the administration of former President Barack Obama.

“Millions of American consumers use small-dollar loans to manage budget shortfalls or unexpected expenses,” Dennis Shaul, CEO of the Community Financial Services Association of America, said in October. “The CFPB’s misguided rule will only serve to cut off their access to vital credit when they need it the most.”

Putting the rule on ice this week brought immediate fire from consumer advocacy groups.

“As a Congressman, Mick Mulvaney took thousands of dollars from the payday industry,” said Karl Frisch, executive director of Washington, D.C. -based Allied Progress. “Now, as ‘acting director’ of the CFPB, he is returning the favor by sabotaging these important protections that would have guarded against predatory lenders and protected struggling consumers from falling into the cycles of debt with sky-high interest rates.”

The consumer bureau said in a statement it will engage in a rulemaking process to reconsider the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule. That rule would have started Tuesday, though some provisions would not kick in until August.

Payday lenders gave more than $62,000 in campaign contributions to Mulvaney when he was a congressman, according to gift-tracker opensecrets.org. That included more than $31,000 in the 2016 election cycle, when the South Carolina Republican ranked among the top 10 congressional candidates in contributions from the sector. Also in the top 10 in that cycle: Florida Democrats Alcee Hastings and Patrick Murphy, though GOP candidates nabbed about 70 percent of the giving nationally.

While in Congress, Mulvaney called the CFPB a “sick, sad” joke. Trump made Mulvaney his budget director and then appointed him to serve as acting director of the consumer bureau last year.

Improper influence or conflict of interest? “I don’t think so, because I am not in elected office anymore,” Mulvaney said in December. He noted different administrations often diverge on key issues.

On Wednesday, Mulvaney issued a statement calling for the public to submit feedback in coming weeks and suggest ways to improve outcomes to ensure the bureau is “fulfilling its proper and appropriate functions.”

“In this New Year, and under new leadership, it is natural for the bureau to critically examine its policies and practices to ensure they align with the Bureau’s statutory mandate,” he said.

Payday loans often run between $200 and $1,000, due when a borrower receives the next paycheck. Borrowers average a $15 fee for every $100 borrowed, industry officials have said.

Officials in the Obama administration said payday lenders collect $3.6 billion a year in fees on the backs of low-income people who frequently became trapped in debt. About four out of five borrowers soon took out additional loans with mounting fees, supporters of tougher rules said. For many, costs soon approached the equivalent of a 390 percent annual interest rate, often ending in a spiral of overdraft fees, closed bank accounts or bankruptcy, they said.

The proposed rules expressly aimed to end “payday debt traps.” They would require lenders to take greater pains to make sure borrowers can pay them back, limit how many loans they could take out in succession and cap attempts to take money directly from a consumer’s bank account.

The regulatory wrestling match continues at the state level. Bills in the state legislature including SB 920 would allow loans that are larger and have longer terms than Florida law currently allows, according to Vickers’ group, which denounced the initiative as a “new predatory product.”

Frisch said, “The CFPB thoroughly and thoughtfully considered every aspect of this issue over the course of several years. There is no reason to delay implementation of this rule – unless you are more concerned with the needs of payday lenders than you are with the interests of the consumers these financial bottom-feeders prey upon.”



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