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What 's demands that Consumer Bureau pull new payday proposal




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                 Rep. Maxine Waters, the chairman of the powerful House Financial Services Committee, said she is" deeply troubled "by a proposed revision that eases easing restrictions on payday lenders Zach Gibson / Getty Images </p>
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<p> Rep. Maxine Waters (D-Calif.) On Wednesday called on Consumer Financial Protection Director Director Kathy Kraninger to rescind a new proposal easing restrictions on payday lenders, in a sharp rebuke to the new CFPB chief on her first major initiative. </p>
<p> Waters, the chairman of the powerful house financial services committee, said she was "deeply troubled" by the proposed revision, which would scrap a key underwriting requirement of the consumer agency's contentious rule cleaning in the lenders, which she said often charge interest rates or "300 percent or more." Story Continued Below </p><div><script async src=

"This proposal essentially sends a message to predatory payday lenders that they may continuously e vulnerable communities without penalty, ”Waters said in an e-mailed statement. “In urge Director Kraninger to rescind this proposal and work on implementing a comprehensive federal framework – including strong consumer safeguards, supervision, and robust enforcement – to protect consumers from the cycle of debt.” The CFPB's original rule, released in October 2017 under Obama era director Richard Cordray, would have required lenders to verify borrowers' income and debts until they could afford the loans. The bureau on Wednesday proposed eliminating the so-called ability-to-repay requirement, arguing that it would have limited consumer access to credit and disrupted the market. The new rule would take effect in November 2020, the bureau said.

Industry advocates say the requirement is overly burdensome, making it more cost-effective for driving loans and potentially driving narrower lenders out of business. A senior CFPB official earlier on Wednesday honed those groups, saying the agency would be "significant market effects as a result of those underwriting requirements." "The agency estimates that roughly two-thirds of customers will not qualify for a first loan, "and few of those would qualify for a second loan if the rule went forward as, the official said.

" The agency estimates that the number of loans made to the approximately 12 million borrowers would be cut in would be close to roughly 90 percent, "officially added, estimating that" roughly three out of four payday storefronts would close, and as many as nine out of 10 vehicle title storefronts would close. "

While the official said, consumers would lose access to credit, the original rule's defenders argue that the ability to repay requirements protect borrowers from getting caught in loans with exorbitant interest rates. protections will result in millions of hardworking families trapped in a cycle of debt and poverty, ”said Sen. Sherrod Brown (D-Ohio), the ranking member on the Senate Banking Committee. “The CFPB is helping payday lenders rob families of their hard-earned money.”

Consumer advocates are also quick to note that the agency received an unprecedented number of public comments on the first rule.

"They got over 1.4 million comments on the rule, and they took them into account, "said Alex Horowitz, a researcher at the consumer finance project of the Pew Charitable Trusts. Pew conducted a survey in 2012, finding that just 42 percent of borrowers said they could afford to repay more than $ 100 a month, even though the average borrower took out a $ 375 loan.

" Well thought out, well balanced, "Horowitz added." They substantiated everything that they did. "The senior CFPB official on Wednesday cast doubt on the legitimacy of some of those comments, referring to" … so that's something we're keeping in mind as we move forward. "

The official said the bureau does not have the legal authority to mandate the underwriting requirements, a determination that he said was provisional.

“The director hasn't formed an opinion on what to do or what should be done,” he said. The new proposal will have a 90-day comment period.

"We've reached preliminary conclusions, for which we're seeking comment, that aspects of the evidentiary basis are sufficiently robust to support the findings made in the 2017 rule, "the official added," and the way our legal authority works is if you cannot support the findings, you do not have the authority to take the regulatory intervention. "

The official was referring to a 2012 study at Columbia University law professor Ronald Mann surveying 1,374 payday loan borrowers on their understanding of the length of the loan. The study found that 40 percent of borrowers didn't know when they'd be able to pay back a loan, and the agency cited its findings repeatedly in its original rule.

Man, however, also issue with the agency's interpretation of his study. Note that 60 percent of borrowers in his survey accurately predicted their loan timelines, he condemned the agency for its move towards payday loans – a move that will inconvenience the large share of borrowers who use this form of credit with their eyes wide open . "

A federal judge in November granted the CFPB request to delay the August 2019 implementation date for the rule, citing the agency's planned revisions, in a case brought by industry groups over the contentious regulation.

Former acting director Mick Mulvaney joined with the groups suing the bureau in that case. His and the White House's closeness to the payday industry as a congressman from South Carolina has drawn scrutiny from consumer advocates.

Payday lenders and individual donors in the industry contributed some $ 3 million to President Donald Trump's inauguration and Trump -linked PACs, according to data from the Center for Responsive Politics.

"This is payback – pure and simple – for the millions of dollars in support the payday lending industry has funneled into Trump's campaign and inauguration fund," said Jeremy Funk , a spokesman for the consumer group Allied Progress

The payday interest group Community Financial Services Association of America held a conference at Trump's Doral golf resort in April. CFSA released a statement Wednesday lamenting that the CFPB did not rescind other provisions of the 2017 rule.

The lack of supporting evidence was part of the same arbitrary and capricious decision-making of the previous director, ”said CFSA CEO Dennis Shaul.


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