U.S. Senator Tammy Baldwin Raises Opposition to Trump CFPB’s Payday Predator Protection Plan

WASHINGTON, D.C. – U.S. Senator Tammy Baldwin joined a group of 47 Senators, led by Senators Jeff Merkley (D-OR), Dick Durbin (D-IL) and Sherrod Brown (D-OH), in opposing the Consumer Financial Protection Bureau’s (CFPB) new attempt under the Trump administration to gut its own payday protection rule.

“Repealing this rule provides a green light to the payday lending industry to prey on vulnerable American consumers,” write the Senators in a letter to Trump-appointed CFPB Director Kathy Kraninger. “In drafting these devastating changes to the Payday Rule, the CFPB is ignoring one of the most fundamental principles of consumer finance — an individual should not be offered a predatory loan that they cannot pay back.”

Payday loans often carry interest rates of 300% or more, and trap consumers in a cycle of debt. The CFPB’s own research found that four out of five payday consumers either default or renew their loan because they cannot afford the high interest and fees charged by payday lenders.

The CFPB’s previous payday protection rule—which would be gutted by this new action—was finalized in October 2017 after years of research, field hearings, and public input.

“The CFPB has not made similar research, field hearings, or investigations, if they exist, available to the public in order to explain its decision to repeal crucial elements of the rule,” the Senators write. “The absence of such research would not only imply neglect of duty by the CFPB Director, but may also be a violation of the Administrative Procedure Act.”

In response, the Senators asked for the CFPB to make public the following information no later than 30 days from today:

1. Any research conducted regarding the impact on borrowers of repealing these requirements for payday loans;
2. Any field hearings or investigations performed by the Bureau after the rule was finalized regarding the impact of repealing these requirements for payday loans;
3. Any public or informal comments sent to the CFPB since the rule was finalized regarding to these provisions in the Payday Rule; and
4. Any economic or legal analyses conducted by or sent to the CFPB concerning the repeal of these requirements for payday loans.

The full text of the letter is available below.

Dear Ms. Kraninger:

We write to express our opposition to the Consumer Financial Protection Bureau’s effort to strike the affordability standards and limit on repeat loans in the Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule (Payday Rule). This proposal eviscerates the cornerstone of the Payday Rule, and will likely trap hard working Americans in a cycle of debt.

On February 6, 2019, the Consumer Financial Protection Bureau (CFPB) issued a notice indicating its intent to eliminate underwriting requirements and limits on repeat lending for payday loan products. Currently under the Payday Rule, lenders will be required to verify a borrower’s income, debts, and other spending in order to assess a borrower’s ability to remain current and repay credit, and provide an affordable repayment plan for borrowers who take out more than three loans in succession.

Repealing this rule provides a green light to the payday lending industry to prey on vulnerable American consumers. In drafting these devastating changes to the Payday Rule, the CFPB is ignoring one of the most fundamental principles of consumer finance — an individual should not be offered a predatory loan that they cannot pay back.

Payday loans are typically small-dollar loans that have interest rates of over 300 percent, with expensive fees that trap working families in a vortex of never-ending debt. According to the CFPB’s research, “four out of five payday borrowers either default or renew a payday loan over the course of a year.”[1]

In October 2017, the CFPB finalized the Payday Rule after years of research, field hearings, and investigations into abusive practices that are prevalent in the payday lending industry. The CFPB has not made similar research, field hearings, or investigations, if they exist, available to the public in order to explain its decision to repeal crucial elements of the rule. The absence of such research would not only imply neglect of duty by the CFPB Director, but may also be a violation of the Administrative Procedure Act.

For this reason, we respectfully request that the following information be provided to us and published immediately for public access:

1. Any research conducted regarding the impact on borrowers of repealing these requirements for payday loans;
2. Any field hearings or investigations performed by the Bureau after the rule was finalized regarding the impact of repealing these requirements for payday loans;
3. Any public or informal comments sent to the CFPB since the rule was finalized regarding to these provisions in the Payday Rule; and
4. Any economic or legal analyses conducted by or sent to the CFPB concerning the repeal of these requirements for payday loans.

We look forward to learning more about the process by which the CFPB reached this decision and request a response within 30 days.