Trump administration sides with payday lenders against consumers

WASHINGTON—Not content with helping legitimate business, the Trump administration extended a hand to one of the sleaziest sectors of the corporate world, payday lenders, rolling back Obama administration rules designed to protect consumers from their abuses.

The National Consumers League slammed the rollback, which Trump official Mick Mulvaney disguised as “reconsideration” of the anti-payday lenders rule. The rule formally was scheduled to start on Jan. 19, but really kick in six months later.

Mulvaney, a former right-wing South Carolina congressman, heads Trump’s Office of Management and Budget and is also acting head of the Consumer Financial Protection Bureau (CFPB), the agency established after the Great Recession to protect consumers from financiers’ fraud and abuse. That includes payday lenders.

“Payday lenders are bottom feeders,” National Consumers League Executive Director Sally Greenberg e-mailed. “If there is a need for these exorbitant loans, then the CFPB must exert its authority to rein in its most egregious predatory practices.”

Payday lenders prey on an estimated 30 million people—most of them senior citizens, retirees, minorities, and workers—forced to live paycheck to paycheck and who often come up short.

The payday lenders advance them money, drawn against future paychecks, at exorbitant, and often triple-digit, interest rates. If the consumers can’t immediately repay, the payday lenders roll the loans often at even higher rates.

The rule, former CFPB Director Richard Cordray said when the agency rolled it out last Oct. 5, would stop “payday debt traps” by “requiring lenders to determine upfront whether people can afford to repay their loans.”

“These strong, common-sense protections cover loans that require consumers to repay all or most of the debt at once, including payday loans, auto title loans, deposit advance products, and longer-term loans with balloon payments,” CFPB added at the time.

“Too often, borrowers who need quick cash end up trapped in loans they can’t afford. The rule’s common-sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail,” Cordray added.

Mulvaney’s Jan. 19 rollback is in character. While a GOP congressman, he loudly and rabidly opposed the Dodd-Frank Law, passed to rein in the financial fraud and finagling that led to the crash. He particularly hated the CFPB. Curbs on the agency’s rules against payday lending are part of a House-GOP-passed banking bill last year

Despite this history, and Mulvaney’s move, Greenberg still expects the agency to enforce the law. “We call on the very agency set up to rein in payday industry abuses to do its job and not give a free pass to this industry that has made its billions off the backs of working Americans in need of a financial break,” she e-mailed.