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New House bill would kill consumer watchdog payday loan rule

  • Bipartisan cosponsors of the House bill say the rule, which the Consumer Financial Protection Bureau finalized in October, limits consumer access to short-term loans.
  • The CFPB's controversial rule would require lenders to make sure borrowers can afford to pay back their loans.
  • The resolution comes about a month after Republicans voted to overturn another rule from the CFPB that would have banned mandatory arbitration in some consumer agreements.
  • The move is the latest in a string of attacks against the CFPB, which critics say is overreaching and unaccountable.

Congress has it in for consumer protections enacted by the Consumer Financial Protection Bureau.

A congressional resolution introduced Friday in the House would kill the CFPB's new rule aimed at making sure borrowers of so-called payday loans can afford to repay their debt. The House measure's cosponsors (three Democrats and three Republicans) and the rule's critics say it will block consumers' access to payday loans, which are short-term, small-cash loans consumers often use when they are coming up short until their next paycheck.

"The rule would leave millions of Americans in a real bind at exactly the time need a fast loan to cover an urgent expense," said Daniel Press, a policy analyst with the Competitive Enterprise Institute, in a statement after the bill's introduction.

Ryan J. Foley | AP

The payday loan rule, not scheduled to take effect until mid-2019, would require lenders to make sure the borrower can afford to pay off the loan and still meet their daily expenses and obligations. It also would limit the number of such loans that could be made back-to-back to three per borrower.

Supporters of the rule are hoping the congressional resolution is dead in its tracks.

"Payday lenders put cash-strapped Americans in a crippling cycle of 300 percent-interest loan debt," Yana Miles, senior legislative counsel at the Center for Responsible Lending, said in a statement.

The Consumer Financial Protection Bureau issued the rule in October under then-director Richard Cordray, who resigned from the agency in late November.

Although Cordray appointed an interim head from within the bureau — his former chief of staff, Leandra English — President Trump shortly thereafter announced that his budget director, Mick Mulvaney, will serve as acting director. Several days later, a U.S. district court judge rejected English's request for a temporary restraining order to prevent Mulvaney from taking over.

Office of Management and Budget (OMB) Director Mick Mulvaney arrives to speak to the media at the U.S. Consumer Financial Protection Bureau (CFPB), where he began work earlier in the day after being named acting director by U.S. President Donald Trump in Washington November 27, 2017.
Joshua Roberts | Reuters
Office of Management and Budget (OMB) Director Mick Mulvaney arrives to speak to the media at the U.S. Consumer Financial Protection Bureau (CFPB), where he began work earlier in the day after being named acting director by U.S. President Donald Trump in Washington November 27, 2017.

The rule repeal effort comes amid repeated attacks from critics about the embattled consumer bureau, which they say is overreaching and unaccountable. Consumer advocates, meanwhile, point to the nearly $12 billion the bureau has returned to more than 29 million people wronged by financial institutions and related businesses.

The congressional resolution also comes about a month after Republican lawmakers eked out a narrow victory in repealing a separate CFPB rule that would have banned financial firms from requiring customers to settle disagreements through arbitration.

Both the resolution introduced today and the one that passed in October use the authority of the Congressional Review Act, which gives lawmakers 60 legislative days to overturn a rule once it's published in the Federal Register. The payday loan rule appeared there on Nov. 17.

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