Payday Lenders Wage New Wars Against Consumers and Regulation
Style Magazine Newswire | 4/12/2018, 2 p.m.
By Charlene Crowell
Nearly seven years ago, Congress fought for and won enactment of reforms that would help ensure that everyone would play by the same financial rules. The promise to the nation was that the days of ignoring the long-term health of the national economy as an excuse to justify lucrative and short-term profits would be over. The Dodd-Frank Wall Street Reform Act gave guardrails to lenders and consumers alike.
Charged to keep that vow was the Consumer Financial Protection Bureau (CFPB). Serving as the nation’s financial cop-on-the-beat, CFPB worked to bring fairness and balance to the marketplace. So much so that 29 million consumers received nearly $12 billion in restitution from illegal and deceptive practices in its first years of operation.
Lately however, changes in Washington have wrought a different attitude, one that prefers stripping away rules and regulation that protect people, as unnecessary nuisances that bother businesses trying to make a buck – even if it isn’t an honest one.
Want an example? Consider the payday lending industry and its multi-pronged efforts to oppose reasonable regulation. Three recent developments unmask a determination that is as deceitful as the little loans it sells that set up deep debt traps for borrowers.
On March 22, South Carolina Senator Lindsay Graham introduced a Congressional Review Act resolution, S.J. Res. 56, to repeal the CFPB’s payday lending rule and prohibit the CFPB from doing something substantially the same in the future. An identical action was introduced earlier in the House of Representatives. These measures await action in both chambers.
Then on April 9 and under the joint auspices of two payday lending lobbyists, the Community Financial Services Association of America (CFSA) and the Consumer Service Alliance of Texas, a lawsuit was filed that alleges the CFPB is “unconstitutional”. The suit also takes aim at the same payday and small-dollar loan rule set to take effect in August of next year.
According to the lawsuit, “The Final Rule rests on unfounded presumptions of harm and misperceptions about consumer behavior and was motivated by a deeply paternalistic view that consumers cannot be trusted with the freedom to make their own financial decisions.”
Reactions from civil rights and consumer advocates clearly indicated they weren’t buying that bit of swamp land.
“It's no surprise that predatory payday lenders are behind litigation like this,” said Hilary O. Shelton, NAACP Washington Bureau Director and Senior Vice President for Policy and Advocacy. “With little accountability for their actions, predatory payday lenders have long preyed upon communities of color, draining them of their hard-earned savings, and with their debt trapping practices, our economic futures. This CFPB rule establishes a much-needed set of transparent responsibilities for lenders and basic rights and protections for borrowers."
“At a time when many Americans are living paycheck to paycheck while financial institutions are making record profits, we need stronger protections for consumers against unscrupulous financial practices,” said Marisabel Torres, Senior Policy Analyst, Economic Policy, UnidosUS.
“Yet the payday industry is proving once again that they are focused on lining their pockets, not on the devastating financial harm their products cause. The CFPB’s payday rule has support from the Latino community, who are far too often targeted and exploited by predatory payday lenders, and we oppose attempts by the industry to impede the rule’s swift implementation.”