In October of 2017, the Consumer Financial Protection Bureau leveed new rules on the payday loan industry, requiring these quick cash establishments to check a borrower’s ability to pay back the money before getting access to cash. At the time, the CFPB’s actions were expecting opposition from industry lobbyist and lawmakers alike, and this week that prediction came true with a new piece of legislation proposed to Congress that would essential overturn the CFPB’s rulings.
Consumer Financial Protection Bureau Rules
The rules targeting payday lending were enacted to help borrowers who need quick cash to avoid being trapped in loans that they can’t afford. These loans, whose interest rates can top 390%, are often utilized by the lower income brackets of America and can quickly become too high to pay back once fees and interest begin piling on. Under these new rules set up by the CFPB, lenders must conduct what is known as a “full-payment”. Additionally, the CFPB set out another rule that banned mandatory arbitration in payday agreements. Many consumers praised the efforts of the consumer protection group, claiming that a step toward national uniformity of lending laws was a big win.
Congress Steps in
In October, Congress took its first steps in rolling back the CFPB’s new rules by voting to overturn the rule protecting consumer agreements from arbitration. Now, just this week, Congress is setting its sights on killing the new “full-payment” rule. The bipartisan sponsors of the bill claim that the new rule will block consumer’s access to small, short-term loans they need to hold them over until their next paycheck. A policy analyst with the Competitive Enterprise Institute went as far as saying that “the rule would leave millions of Americans in a real bind at exactly the time need a fast loan to cover an urgent expense”.
Payday lending is actually outlawed in many states as the rates are just too high for many constituents. The opinions on whether the payday loan industry should be subjected to tighter regulations by the CFPB or other regulatory bodies is largely divided.