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CFPB Payday Rule Survives Legislative Threat, Remains Intact For Now

Wednesday was a victorious day for consumer advocates across the country. It marked the last day for lawmakers to act to repeal the Consumer Financial Protection Bureau’s payday rule, and the deadline passed without Congress voting to repeal the rule. The rule requires payday and car title lenders to either assess a borrower’s ability to repay before issuing a loan, or issue a limited number of loans without assessing a borrower’s ability to repay.

Resolutions to repeal the rule were introduced in both the House and Senate, but failed to garner sufficient support. Among the Indiana delegation, only representatives Messer, Banks, and Hollingsworth signaled support for repeal by cosponsoring the resolution. Lawmakers sought to repeal the rule using the Congressional Review Act. (The CRA is a fast-track legislative tool that allows lawmakers to undo federal regulations with a simple majority vote in both the House and Senate. If invoked, the CRA prohibits the federal agency that issued the rule from rolling out regulations substantially the same as those it reversed.) The Congressional Review Act allows lawmakers 60 legislative days to act from the day a rule is published in the Federal Register. Since neither chamber brought the payday rule resolutions to a vote during the limited time allotted for a CRA challenge, the payday rule was not overturned.

“In a January 2018 poll, 75% of Hoosiers opposed a payday loan store opening in their community. That’s because they know the destabilizing impacts of this business model on consumers and neighborhoods, such as increased debt and greater likelihood of losing one’s bank account due to overdraft and insufficient funds fees,” said Kathleen Lara, Policy Director at Prosperity Indiana.

Although Wednesday was a celebratory day for consumer advocates, the payday rule remains in jeopardy.  Acting CFPB Director Mick Mulvaney has frozen the deadline for compliance with the rule as the bureau considers ways to amend and, likely, weaken, it through a public comment period. The Community Financial Services Association of America, a group that represents the payday lending industry, is also suing the bureau over the rule, and it’s possible that the bureau could choose not to defend itself in the case.

“We are grateful that members of Congress decided to let the payday rule stand. But it is clear that there is still work to be done: we must convince Acting CFPB Director Mulvaney to do the same, and continue to work toward a rate cap to bring down the cost of credit for Hoosiers—something the CFPB was not permitted to do,” said Erin Macey, policy analyst at Indiana Institute for Working Families.

Unlike 15 other states and D.C., Indiana permits high-cost payday loans. While in-state advocacy groups and working people have been pushing for state representatives to pass a 36%-or-lower cap on interest rates for payday loans, none exists to date—making the CFPB rule critical in protecting Hoosiers who may utilize these products. Advocates for the 36 percent APR cap will seek legislation at the state level again next year.

Kathleen Taylor