The Consumer Financial Protection Bureau issued its final payday lending rule this month that will protect predatory payday lenders and victimize Main Street consumers.
Financial predators will be able to make most of their loans to borrowers who will not be able to repay their loans on the very day they receive them. President Trump’s CFPB should be called the ‘Financial Predators Protection Bureau’ or the FPPB,” says Dennis Kelleher, President and CEO of Better Markets.
“No one in his or her right mind would lend someone money knowing that this person could not pay it back, unless you were a predatory payday lender. That’s actually their business model,” Kelleher says. “Two-thirds of payday lender borrowers could not afford to repay their payday loans when they received the loans, according to a study by the CFPB. That’s how payday lenders get rich: they trap consumers into taking out loans they cannot repay so that they will take out more loans to repay the prior loan that they could not afford in the first place. That debt trap is little more than a debtors’ prison without bars.”
As Kelleher explains, “That predatory behavior is why the Obama administration’s CFPB enacted a rule that, among other things, required payday lenders to determine if a borrower could repay the loan at the time the loan was made…. Today, the Trump administration’s CFPB eliminated that provision of the rule, known as the underwriting requirement.
“That’s not consumer protection; that’s predator protection and that’s why Trump’s CFPB should be called the ‘Financial Predators Protection Bureau’ or the FPPB.”
When the rule was proposed, Better Markets submitted a comment letter highlighting the CFPB’s failure to justify the change and its decision to protect the payday lending industry at the expense of millions of Americans struggling to make ends meet.