Nation & World

CFPB aims to weaken payday lending rule

Existing rule is scheduled to go into effect in August

FILE PHOTO: Kathleen Laura Kraninger testifies before a Senate Banking Committee hearing on her nomination to be director of the Consumer Financial Protection Bureau on Capitol Hill in Washington, U.S., July 19, 2018. REUTERS/Alex Wroblewski/File Photo
FILE PHOTO: Kathleen Laura Kraninger testifies before a Senate Banking Committee hearing on her nomination to be director of the Consumer Financial Protection Bureau on Capitol Hill in Washington, U.S., July 19, 2018. REUTERS/Alex Wroblewski/File Photo

The Consumer Financial Protection Bureau on Wednesday proposed drastically weakening Obama-era rules governing payday lenders.

Under the existing rule, which is set to go into effect in August, payday lenders are required to verify borrowers can afford the loans they are being offered.

The proposal would rescind that requirement and delay the rule’s implementation until 2020.

The proposal is a significant win for payday lenders. The industry worried the original rule would force most payday lenders to close their doors and sued to block its enforcement.

Short-term, high-interest loans should be regulated, but the Obama-era rules are too cumbersome and costly, they say.

The proposal is sure to anger consumer advocates, who have warned that many payday lenders trap borrowers in a cycle of debt, saddling them with loans they have no realistic ability to repay.

The announcement is one of the most dramatic steps the Trump administration has taken yet to remake the CFPB, which Republicans and business leaders complained for years was too aggressive and often pushed legal boundaries to go after financial companies.

Under the Trump administration, the CFPB has softened its approach.

It has dropped several lawsuits against payday lenders and stripped enforcement powers from its fair lending office.

ARTICLE CONTINUES BELOW ADVERTISEMENT

Rather than pursuing eye-popping penalties, the bureau must balance the needs of consumers and the financial companies it regulates, agency leaders say.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.

Give us feedback

We value your trust and work hard to provide fair, accurate coverage. If you have found an error or omission in our reporting, tell us here.

Or if you have a story idea we should look into? Tell us here.