In June, the Consumer Financial Protection Bureau (CFPB) released its much-anticipated proposal pertaining to the payday loan industry. The consumer federal watchdog agency announced new rules and regulations for payday loans at the federal level, which is the first time in the nation’s history.
CFPB director Richard Cordray gave the general public 90 days to comment on the regulatory framework. Cordray said that he wanted to get everyone’s feedback so their proposal could be improved upon.
Well, that 90-day window is coming to a close. The American general public – consumers, payday loan businesses, consumer advocacy groups, community leaders and so on – will have until October 9 to submit any complaints, concerns, questions or grievances regarding the CFPB’s proposal.
Since June, many proponents and opponents of the forthcoming regulations have openly explained why the new rules and regulations are good or bad. Some say the proposal goes too far or it doesn’t go far enough. One of those people in the latter camp were Nick Bourke of the Pew Charitable Trusts.
“The CFPB is missing a big opportunity to encourage safer and more affordable loan options, our goal is to leave the best online payday loans standing while weeding out those who can’t follow the rules” he said.
Also, Traci Wickett, executive director of the United Way of Southern Cameron County, recently panned a recommended rule that would prevent low-income borrowers from entering into a payday loan debt trap. The CFPB said in its initial release that one new rule would require lenders to ensure borrowers do have enough funds to pay their debt when they take out a payday loan. She argues that many payday loan lenders could actually be exempt from this provision in the legislation.
“That’s just unacceptable, that that many loans would be exempted from the ability-to-repay,” she said.
Ultimately, according to Wickett and others, the CFPB needs to close several loopholes in the proposal.
Meanwhile, Dave Pommerehn of the Consumer Bankers Association, warned that some of the new rules could put a lot of payday loan stores out of business, which will ultimately hurt impecunious customers.
“This is resource prohibitive for most providers of this type of lending, whether they be a bank or a non-bank,” he averred. “And quite honestly, the cost [of compliance] would add greatly to the cost of the loans themselves, making them rather cost-prohibitive to offer.”
And, of course, as the United States heads towards the finish line of an election cycle, many members of Congress are looking to either shelve the proposal or get President Obama to sign it before he leaves office. Some Congressmen argue that the CFPB’s proposal will “trample on sovereignty of both consumers and Native American tribes.” Other Congressmen say the regulations help consumers who are “already overextended.”
The current administration has pledged over the years to tackle payday loans. With the incumbent president signing as many regulations as possible before he exits the White House, the CFPB’s payday loan framework could be one of the final regulatory acts he puts into law.