The Trump administration on Wednesday rolled back protections set to make payday loans less risky for borrowers, which could affect millions of young people: Almost 10 million millennials have taken out one of these high-interest, short-term loans in the past two years.
The Consumer Financial Protection Bureau, the government agency tasked with regulating financial companies, said it plans to abandon Obama-era payday loan stipulations that would require lenders to ensure borrowers could repay their loans before issuing cash advances.
"This proposal is not a tweak to the existing rule; instead, it's a complete dismantling of the consumer protections finalized in 2017," says Alex Horowitz, senior research officer at Pew's consumer finance project. Over the past eight years, Pew Charitable Trusts has extensively researched the payday loan market and weighed in on policy proposals at the state and federal level.
The Obama-era rules were already starting to work, Horowitz says: "Lenders were making changes even before it formally took effect, safer credit was already starting to flow, and harmful practices were beginning to fade." So there was no real reason or need, he says, for the shift.