NEW YORK (AP) – The nation's federal financial watchdog said Wednesday it intends to abolish most of its critical consumer protection policies that govern payroll.
The move is a major victory for the payroll industry, which claimed the government's regulations could kill a large part of its business. There is also a huge loss for consumer groups, which says payday lenders utilize the poor and unfavorable of loans that have an annual interest rate of as much as 400 percent.
The cornerstone of the regulations was a requirement that lenders make sure borrowers could afford to repay a payday loan without having stuck in a cycle of debt, a standard known as "ability to repay." This standard would be eliminated under the new rules. Another part of the rules, which would have limited the number of payday loans a person could roll over, was also eliminated.
Critics of the payroll industry have argued that without the new drawing standards, CFPB's new rules are effectively tooth-free. The main criticism of the payroll industry was that many borrowers would take months to repay a loan that was originally designed to last only a few weeks, renewing the loan over and over again.
"This proposal is not an adaptation to the existing rule … it is a complete dismantling of the consumer protection (agency) that was completed in 201
The announcement was the first abolition of regulations under the consumer finance agency's new director, Kathy Kraninger, who took over the agency last year, Mick Mulvaney, who was appointed by President Donald Trumps as Acting Director of the Agency at the end of 2017, announced a year ago the agency's intention to revise the rules. As a South Carolina congressman, Mulvaney received tens of thousands of dollars in political donations from the payroll industry, raising concerns he was for connected to the industry to properly regulate it.
Community Financial Services Ass ociation of America, a payday loan group, holds its annual conference in March at the Trumps Doral Golf Club in Miami. It held its conference there last year too. Government guard groups have criticized the use of Trump hotels and resorts by businesses and lobby groups as legal bribes, a way to influence regulation and politics by giving money to the president.
CFSA did not respond to an Associated Press request for comment on that criticism, but sent a statement saying it was "disappointed" with certain provisions that were intact and that members were looking forward to returning to Doral in year.
"The venue is popular with our members and it meets our needs," said CSFA CEO Dennis Shaul.
During the US administration, CFPB spent nearly five years working for a process to nationalize the regulation of the payday industry, which mainly The government started the process back in 2012, and the final rules were completed in late 2017. It was the last major pieces of regulation made under Richard Cordray, the agency's first permanent director before leaving the agency.
" I think this is a bad development for consumers, "Cordray said." We looked closely at this industry and it was a common problem with borrowers being caught in long-term debt. We had put together what I thought was a modest proposal. The change is really disappointing and hasty. "
CFPB suggested keeping a portion of the payday lending loan: a ban on the industry making more debits on a borrower's bank account, which the criminals told argued that borrowers were having problems with overdrafts. In a statement, CFSA felt that CFPB's cancellation did not go far The proposed new rules are subject to a 90-day commentary period by the public, the proposed changes being almost certain to meet legal challenges, since the agency is taking a radical departure from its former position, which is not federal regulators usually allowed to do under law.