CFPB Payday Rule Survives Legislative Threat, Remains Intact For Now

Small business owners urge consumer bureau to preserve and enforce the rule, protect consumers against payday lending debt trap

WASHINGTON, DC - Congressional Review Act (CRA) resolutions—S.J. Res 56 and H.J. Res 122—to repeal the Consumer Financial Protection Bureau’s (CFPB or consumer bureau) payday and car title lending rule will not advance in Congress, as their legislative clock expired yesterday. The CFPB rule, finalized in October, establishes basic consumer protections on these 300% or more interest loans, including the common-sense standard that lenders should have to verify a borrower’s ability to repay before making the loan. Consumer and civil rights advocates, including the Main Street Alliance, are urging the consumer bureau to keep intact the rule, which is set to into effect summer 2019, and to fulfill the bureau’s responsibility to enforce the law.

The CRA is a fast-track legislative tool that allows lawmakers to undo federal regulations years in the making without public hearings with a simple majority vote in both the House and Senate. If invoked, the CRA prohibits a federal agency—like the consumer bureau—from rolling out regulations substantially the same as those it reversed. Since neither chamber brought the payday rule resolutions to a vote during the limited time allotted for a CRA challenge, the important rule was not overturned.

“Payday loans are bad for business.  They decimate the local economy, siphoning off money that would otherwise be spent in the community, and weaken consumer demand for other goods and services. This hurts small businesses that depend on local customers to survive. Today’s news is a significant victory for Main Street, which was hit first and hardest by the financial recession, and took the longest to recover,” said Amanda Ballantyne, National Director of the Main Street Alliance.

As written, the payday lending rule will result in fewer families falling into financial ruin. At the heart of the rule is the common-sense principle of ability to repay based on a borrower’s income and expenses—which means that lenders will be required to determine whether a loan is affordable to the borrower before making it. An affordable loan is one a borrower can reasonably be expected to pay back without re-borrowing or going without the basic necessities of life – like food or rent money. In a 2017 poll of likely voters, more than 70 percent of Republicans, Independents, and Democrats support this idea. The requirement helps to ensure that a borrower can repay without reborrowing and without defaulting on other expenses—that is, without getting caught in a debt trap.

Even as they prepare for additional threats to the rule, organizations from around the country are joining Main Street Alliance in lauding the defeat of the CRA resolutions as a victory for communities who came together in a coalition to fight against the payday lending debt trap. More than 1,000 advocacy groups in all 50 states have long been pushing to see this important rule come to fruition, which was developed over the course of more than five and a half years.