Payday lenders have a powerful new protector at CFPB
You’d think President Donald Trump’s White House budget manager Mick Mulvaney would have his hands full. After all, he was responsible for the recent government shutdown, which he called “Pretty cool.” In his spare time, however, Mulvaney also runs the Consumer Financial Protection Bureau, or CFPB – as if to run it in the ground.
In perhaps his most Orwellian move to date, Trump handed the reins of the CFPB over to Mulvaney, who once called the agency a “sick and sad joke.” And Mulvaney is a man on a mission: he’s relentlessly transforming the Consumer Financial Protection Bureau into the Payday Lender Protection Bureau. Here is a sample of his recent work:
▪ Without explanation, the CFPB dropped a lawsuit in Kansas against four payday loan companies. The lawsuit alleged the companies were operating a payday call center in Overland Park, although they were formally organized on an Indian reservation in California.
▪ The CFPB quietly ended an investigation into a South Carolina installment lender who donated to Mulvaney’s campaigns as a lawmaker.
▪ Mulvaney did not request any funding for the agency’s budget in the second quarter of 2018.
More worryingly, however, Mulvaney said the CFPB would “reconsider” its recent regulations that would require predatory lenders to assess whether borrowers can repay their loans. This is probably the first step towards removing a vital restriction on low-value loans that local activists and consumer groups have fought for years to implement.
The CFPB, led by former director Richard Cordray, had brought the payday lending industry to a halt. For example, his enforcement action against Cash America resulted in $ 19 million in refunds to consumers and fines for allegedly automatic signing of debt collection documents, overcharging of military borrowers, and destruction of records.
Now, however, the country’s loan sharks are starting to reap the rewards of their continued efforts to take money from our most vulnerable citizens and use it to buy influence: since 2015, they have donated 1.5 million. dollars to congressional lawmakers, $ 300,000 to the Republican. National Committee and the Republican National Committee of Congress. They also spent $ 6.2 million fighting state-level regulation. That doesn’t include the $ 2 million the payday loan industry spent to defeat an interest rate cap initiative in Missouri in 2012.
Payday and car title loans drain $ 8 billion in fees each year from people who accept them in the hope of short-term financial relief and who typically find themselves in long-term traps.
Annual interest rates from lenders in Missouri and Kansas regularly exceed 400%, but local lawmakers have shown no desire to place meaningful restrictions on an industry that rewards them with nice contributions and giveaways.
Kansas City and other regional municipalities have been successful in imposing zoning restrictions on lenders, but it’s largely up to the federal government to tackle payday bullies. Federal prosecutors recently secured a conviction against Leawood businessman Scott Tucker, who was sentenced to more than 16 years in prison for an illegal payday loan scheme.
Mulvaney told CFPB staff that the agency must work for “those who take loans and those who make them.” The available evidence, however, suggests that he strives to ensure that those who take out loans continue to be taken out by those who make them.
We can start correcting this error at the polls in November. It would be “pretty cool” to see predatory lenders face fresh and determined legislative opposition in Missouri, Kansas and across the country from January 2019 at the latest.
John J. Miller is a local lawyer and consumer advocate.