CFPB, Payday Lending, and a Coalition United

When Republicans decidedly won all three branches of our federal government on Election Day, many of us were left contemplating what will become of the progress we have made in the last eight years, and where our efforts should be applied going into the future.

To ease anxiety and begin strategizing, the Indiana Assets & Opportunity Network hosted a conference call on January 27th in order to discuss the changing political landscape which may affect our collective mission to increase asset acquisition for low-wealth Hoosiers. Coalition members were invited to hear from Jenny Robnett and Jose Alvarez from Americans for Financial Reform and Erin Macey from the Indiana Institute for Working Families (IIWF) who largely discussed the future of the Consumer Financial Protection Bureau (CFPB) and about Indiana Senate Bill 245, a bill that if passed, would broaden the ability for payday lenders to keep borrowers indebt for up to two years.

On the topic of CFPB, Robnett and Alvarez explained that the Bureau was created in the wake of the 2008 economic recession as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act which aimed to protect American families from the predatory and unfair lending practices responsible for contributing to the 2008 financial crisis. The CFPB’s duties include enforcing federal laws and regulating the banking and lending industry through the writing of new rules with the protection of American consumers in mind. The CFPB has been highly successful and has returned nearly $12 billion to American consumers since it formed in 2011. Several examples include ordering Wells Fargo and JP Morgan Chase Bank to pay over $24 million in civil penalties and an additional $11 million in refunds to consumers, ordering Moneytree, Inc., a payday loan and check cashing service provider, to pay a $250,000 civil penalty and an additional $255,000 in refunds to consumers, suing Navient, the largest servicer of federal and private student loans, and suing the for-profit college chain ITT Technical Institute. The institutions involved in all these cases were found responsible for deceiving consumers and pushing consumers towards paying higher costs on their loans.

However, Dodd-Frank and the CFPB have been under attack from conservatives since their inception and most recently from the current administration. Robnett and Alvarez listed several different methods the new administration could use to dismantle or thwart the efforts of the CFPB. First, defunding and “defanging” the CFPB through federal legislation and converting the leadership of the Bureau from a single effective director into a slower moving committee which would make it easier to fill with industry members. Conversely, the new administration may aim to prematurely replace current CFPB director Richard Cordray, whose five-year term ends in July 2018, with a new director willing to rollback CFPB’s progress. Finally, the CFPB can also expect to have every rule attacked as the Congressional Review Act only requires a majority to vote down any rule and could deny the Senate the ability to prevent the removal of rules through filibustering. Although organizations may need to shift efforts towards defending the CFPB, Robnett and Alvarez also emphasized the need to continue CFPB’s mission by remaining on the offense against predatory lenders.

In particular, the coalition was encouraged to take action against payday lenders; especially as it is individual states, and not the CFPB, who have the authority to set interest rates on loans which can reach close to 400% Annual Percentage Rate (APR) in Indiana. Macey with IIWF specifically mentioned Senate Bill 245, an attempt by payday lenders to expand their product offerings in the state, as an important piece of legislation to strike down. The bill, which has been covered by the IndyStar and The Journal Gazette of Fort Wayne, would allow payday lenders to offer an installment loan of up to $2,500 over 24 months at 240% APR. This is a radical departure from Indiana’s existing 36% APR cap on installment loans under $2,000, and is over three times higher than the 72% APR minimum currently necessary to be considered felony loan sharking.  Although member organizations have already signed onto an open letter in opposition to SB 245, Erin urged members to call senators on the Insurance and Financial Institutions Committee and pledge your support against SB 245. In addition, if you have been negatively affected by using a payday loan or would like your organization to sign onto the open opposition letter to SB 245, please contact Erin Macey at emacey@incap.org.

To find the senators who sit on the Insurance and Financial Institutions Committee, please click here or review the list below:

Senator Travis Holdman—317-232-9807

Senator Greg Walker— 317-232-9984

Senator Rodric Bray—317-234-9426

Senator Jeff Raatz—317-233-0930

Senator John Ruckelshaus—317-232-9808

Senator Joseph Zakas—317-232-9490

Senator Andy Zay—317-234-9441

Senator Frank Mrvan—317-232-9532

Senator Eddie Melton—317-232-9491