A group of 41 U.S. senators recently urging the Consumer Financial Protection Bureau (CFPB) not to undermine or repeal the CFPB’s payday lending rule.
The rule is designed to rein in predatory business practices by payday lenders. Payday loans, also called small-dollar loans, provide quick access to cash in exchange for full payment plus variable interest rates. Many borrowers use payday loans as a quick fix when ordinary living expenses get too high—the average payday loan borrower makes about $30,000 a year with a credit score in the low 500s.
The CFPB rule states that lenders are restricted from making loans that borrowers are unable to pay back with accrued interest. The rule also limits the number of consecutive loans that can be taken and requires longer repayment timelines.
The rule was supposed to take effect Jan. 16 but has been delayed as it is under review by the CFPB.
“We understand that the CFPB is delaying the rule by granting waivers to companies who would otherwise be taking steps to begin complying with the rule, and that the Bureau may be offering the payday loan industry an opportunity to undermine the rule entirely. We view these actions as further efforts to undermine the implementation of this important consumer protection rule,” the senators wrote in a letter to Acting Director Leandra English and Office of Management and Budget (OMB) Director Mick Mulvaney.
Roughly 12 million Americans use payday loans each year, paying more than $9 billion annually in fees, the Senators stated. The CFPB developed the payday lending rule after reviewing more than 1 million public comments.
“The CFPB’s role in serving as a watchdog for American consumers while making our financial markets safe, fair, and transparent continues to be of critical importance. To this end, we urge you to end any efforts to undermine and repeal this critical consumer protection,” they continued.
The letter was led by Sens. Mark Warner (D-VA) and Tim Kaine (D-VA). It was additionally signed by 39 Democratic senators along with Independents Bernie Sanders (I-VT) and Angus King (I-ME).