Personal Finance

Time runs out for Congress to upend payday lending rule

Key Points
  • Resolutions in both the Senate and House sought to kill the so-called payday rule, which aims to make sure consumers can afford to pay back these short-term, high-cost loans.
  • In January, the Consumer Financial Protection Bureau said it plans to revisit the rule, whose compliance date is August 2019.

The deadline for Congress to kill a rule imposing new requirements on so-called payday lenders has come and gone, according to consumer advocacy groups tracking it.

Resolutions in both chambers would have reversed a federal regulation aimed at making sure borrowers of such short-term loans can afford to repay their debt. Under the Congressional Review Act, lawmakers had 60 legislative days to act from the day the rule was published in the Federal Register. The last day to do so was yesterday.

"By its inaction, Congress has affirmed the need to protect Americans against loans with an average annual interest rate of 390 percent," said Mike Litt, consumer campaign director for advocacy group U.S. Public Interest Research Group.

Suzanne Plunkett | Reuters

A typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate of almost 400 percent, according to the Consumer Financial Protection Bureau, which issued the directive last year.

Despite inaction by Congress, the rule nevertheless faces potential modifications.

In January, the bureau announced it would revisit it through the rulemaking process, which involves seeking public input. As it stands, the compliance date isn't until August 2019.

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The measure requires 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.

The CFPB adopted the rule in October under its Obama-appointed director, Richard Cordray. Since the current acting head, Mick Mulvaney, came on board late last year, much of what was done under Cordray's watch has been revisited by the agency.

Although Congress didn't reverse the payday rule via a resolution, lawmakers successfully used the same tactic to kill a separate CFPB rule last year that would have banned financial firms from requiring customers to settle disagreements through arbitration.

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