CFPB Reconsiders Payday Lending Rule, But Is That What Consumers Want?
The original rule was proposed under the Obama Administration, but it was not finalized until October 2017. The new regulations were set to go into effect this year, but Mick Mulvaney, the bureau’s acting director, plans to reassess the structure of the rule. Mulvaney worked with Congress to undo the rule when it was initially under consideration.
But what do consumers want? After all, the CFPB’s job is explicitly to protect consumer finances. A study from July 2015, shortly after the CFPB’s proposal, showed Americans were overwhelmingly supportive of payday lending restrictions. 75% of survey respondents said payday loans should have more regulations. 78% believed lenders should check a consumer’s ability to repay the loan before issuing the funds, and 75% said the repayment period should cover several months, not two weeks. Typically, payday loans are to be repaid after the recipient’s next paycheck (hence the name).
The bureau says it is reconsidering the rule because it could limit some consumer’s access to emergency or short-term funding, and could cut the industry’s revenue by two-thirds. However, many payday loan recipients get trapped taking out loan after loan just to cover their bills, and the extra money they spend in interest creates a pile of hefty debt. If the CFPB does restructure the payday loan regulations, they will hopefully maintain policies that prevent consumers from over-borrowing.