January 23, 2018

CFPB To Reconsider Payday Lending Rules

This week, the CFPB announced that it will be reconsidering controversial new rules that would have dramatically altered the payday lending industry. The rules were expected to reduce lending volume, and were one of the last actions of the former Obama-appointed director. Is this announcement bad news for consumers? Or is this a welcome step to restrain over-zealous regulators? In this post, I will explore:
  • A summary of the CFPB payday lending rules
  • The two biggest problems with the rules
  • Next steps, and what this means for consumers

The CFPB Payday Lending Rules: A Summary
The actual rule is 1,690 pages long, which is a testament to the complexity of the new requirements. Payday lending is controversial: borrowers have few other options and often need the funds to survive the month. But many borrowers get trapped and would have been better off without the loan. The CFPB tried to balance access with fairness, but ended up creating an unnecessarily complicated response. Within this large document, there are four key actions being proposed:
Dreher Tomkies LLP
In bizarre reversal under Trump, consumer agency reveals moves to protect payday lenders

In what would be a laughable move if it wasn't so incredibly tragic, the Trump administration's newly emasculated Consumer Financial Protection Bureau this week sided with payday lenders over consumers.

You heard right. The CFPB, now led by an appointee of a businessman-politician whose companies have gone bankrupt a half-dozen times, has decided to back off from a planned crackdown on one of the financial sector's most blood-sucking industries.

As if that wasn't bad enough, the bureau announced Thursday it was requesting no new funds to get things done in the upcoming quarter, as opposed to the $217 million sought for the last three months, before President Trump made his presence felt.

Put it all together, and you get a clear message that consumers increasingly are on their own.

On payday lending, the bureau said in a terse statement it will "reconsider" the first federal rules providing oversight of short-term loans, including car title loans.

This is a nearly $50-billion industry, preying on millions of low-income people living paycheck to paycheck.

Say a customer borrows $400. He or she would be obligated to repay the loan within two weeks, plus $60 in interest and fees - the equivalent of an annual percentage rate of more than 300%. Read more at LOS ANGELES TIMES
CFPB drops Kansas payday lending lawsuit, stoking fears Trump is backing off the industry

Without explanation, the Consumer Financial Protection Bureau has dropped a lawsuit in Kansas it had filed a year ago against four payday lending companies.

The move reinforced worries among consumer advocates that the federal watchdog agency is backing away from scrutinizing the payday lending industry.

The CFPB, a federal agency formed in 2011 in the aftermath of the Great Recession, filed a notice of voluntary dismissal Thursday in its case against Golden Valley Lending and three other payday lending enterprises: Silver Cloud Financial, Mountain Summit Financial and Majestic Lake Financial.

The agency had alleged in its lawsuit that the four companies charged interest rates of 440 percent to 950 percent, beyond what several states allow for consumer loans.

The case was filed in Kansas because the CFPB alleged that the companies largely operated out of a call center in Overland Park, despite being formally organized on an American Indian reservation in California.

One of the companies, Silver Cloud Financial, also received funding from a Kansas company called RM Partners, according to the CFPB. Read more at KANSAS CITY STAR

This Congressman Spent a Decade Battling the Agency Trump Might Appoint Him to Lead

Wall Street ally Jeb Hensarling's aides are already transforming the Consumer Financial Protection Bureau.

Ever since White House budget director Mick Mulvaney's embattled appointment two months ago as head of the Consumer Financial Protection Bureau, he's moved swiftly to transform the watchdog agency he once called a "sick, sad" joke. He has shelved investigations and kneecapped the work of CFPB examiners by halting data collection. In just the last week, he announced plans to gut an Obama-era payday loan regulation, spend down the CFPB's rainy day fund, and launch a review of all its operations, signaling a likely overhaul.

"The structure of the CFPB is just fundamentally flawed," Mulvaney said in a November interview shortly after taking control at the agency, adding that he planned to "try and limit as much as we can what the CFPB does to sort of interfere with capitalism and with the financial services market."

Mulvaney, a former Republican congressman from South Carolina, has long sought to dilute the CFPB's power; he once even co-sponsored a bill to eliminate it. Now that he's in charge, he has brought in like-minded allies to help overhaul the agency. That's meant that one of Mulvaney's former House colleagues, Jeb Hensarling (R-Texas), has seen his influence expand at the agency, as Mulvaney has hired two of his senior staffers into high-level positions.

Earlier this month, Hensarling, a persistent critic of the CFPB who chairs the House Financial Services Committee, announced that Kirsten Sutton Mork, his longtime aide and committee staff director, would be leaving his office to become the CFPB's chief of staff. In December, Hensarling staffer Brian Johnson, who also worked as the financial service's committees chief counsel, left his job on the hill to serve as a senior adviser to Mulvaney at the CFPB. Johnson, according to the Wall Street Journal, is expected to have "authority to act on Mulvaney's behalf" as the agency's director straddles his two full-time jobs at the CFPB and the White House. Both Mork and Johnson are leaving Hensarling's office as the congressman winds down his legislative career; in October, Hensarling announced he would not seek reelection in 2018. Read more at MOTHER JONES
CFSA Conference
The Zero That Makes Mulvaney a Hero

By Democrats' design, the CFPB director has vast power. He can use it to shrink the bureau.

Richard Cordray asked Federal Reserve Chair Janet Yellen for $217 million in October-his last such request as director of the Consumer Financial Protection Bureau. Last week Mr. Cordray's acting successor, Mick Mulvaney, made his first quarterly funding request: "$0." What a difference a few months make.

Established in the wake of the 2008 financial crisis according to now-Sen. Elizabeth Warren's vision, the CFPB ran wild under Mr. Cordray's leadership-issuing reams of punishing regulations and conducting endless fishing expeditions, sometimes into industries Congress had specifically excluded from its jurisdiction.

This was possible because the bureau was designed to be insulated from accountability. It is led by a single director, whom the president cannot fire except for cause, and funded by the Fed, so that it need not justify its actions and funding needs to Congress.

Whether this arrangement is constitutional is an open question, currently pending in the U.S. Circuit Court of Appeals for the District of Columbia. But for now, as that court's Judge Brett Kavanaugh has observed, it renders the CFPB director "the single most powerful official in the entire United States Government" (with the possible exception of the president).

That power now belongs to Mr. Mulvaney-and if Mr. Cordray had no constraints in his overreach, his successor is equally free to rein it in. Mr. Mulvaney has already frozen new regulations as well as regulatory "guidance," which agencies often treat as carrying the force of law. But with Mr. Cordray's minions burrowed into the bureau's 1,600-person workforce, tweaks to rules and enforcement policies will only go so far. Read more at WALL STREET JOURNAL

Infographic: The Biggest Myths About the Underbanked. by MicroBilt News


Why financial wellness needs to be an ongoing effort

Financial health has become a growing challenge for the American population. Two-thirds of Americans have difficulty coming up with $1,000 to cover an emergency, 29 percent of adults know someone who delayed the purchase of a home due to student loan debt and only 49 percent of employees are confident they'll be able to retire when they want, according to a PwC survey.

In the past, financial stress wasn't widely discussed in the workplace, but employers are beginning to pay attention as it directly impacts retirement, physical wellness, absenteeism, presentism and productivity. In fact, up to 80 percent spend time on the clock stressing about their personal financial situations. The financial pressure placed on employees in the modern workforce causes stress, but employers have an opportunity to address it in a sustainable way to build a happier, more productive workforce.

Employers have done some work around financial wellness, but largely in the form of one-off lunch-and-learn sessions, webinars and guest speakers. While informative and nice to offer, these tools aren't having the desired, immediate impact nor are they sustainable. They have the right intentions, but don't get the results. Read more at BENEFITS PRO
Secure Check Cashing Systems
House Panel Approves Bill Exempting Most CUs From CFPB Rules

The House Financial Services Committee Thursday approved legislation that would exempt virtually all credit unions from CFPB rules.

Voting 30-25, the committee approved H.R. 1264, which would exempt all financial institutions with less than $50 billion in assets from CFPB rules.

In speaking against the bill on Wednesday, Rep. Maxine Waters (D-Calif.) ranking member of the committee, said the bill would exempt all but one credit union from bureau rulemaking. "This is unacceptable," she said.

She did not identify the credit union, but Navy Federal Credit Union has almost $84 billion in assets.

Bill sponsor Rep. Roger Williams (R-Texas) said that the CFPB has not exercised its authority to exempt small institutions from its rules. His legislation would allow the CFPB to ask banking regulators for permission to waive the exemption if bureau officials believe it is warranted.

"One size, believe it or not, does not and should not, fit all," he added.

Williams accused the CFPB of "bureaucratic over-reach."

But Waters said the legislation would weaken oversight of financial institutions, adding that former CFPB Director Richard Cordray did exercise the exemption authority.
A_S Management
Trump Targets Payday Loans Rules After Receiving Big Donations
This article originally appeared on

Less than two months after President Donald Trump tapped his budget director to run the independent federal agency tasked with protecting U.S. consumers from harmful and predatory financial practices, the agency has moved to undo a rule intended to prevent payday lenders from preying on low-income Americans. The reversal-which follows recent congressional proposals with the same objective-is a major win for the $40 billion payday lending industry, which has recently started delivering big money to Trump and to congressional critics of the Consumer Financial Protection Bureau (CFPB).

The payday lending and title loan industry has been battling the CFPB since Congress created the bureau in 2010-and the fight has intensified since the bureau started crafting rules to regulate short-term lending in 2015. Since then, payday lenders have given $1.5 million to congressional lawmakers and another $300,000 to the Republican National Committee and the National Republican Congressional Committee. The industry also spent another $6.2 million on politics at the state level to combat regulation over the same time period, according to the National Institute on Money in State Politics. (A patchwork system of state-based laws currently governs the industry; a handful of states ban payday loans entirely.)

The industry's shrewdest investment may have been the money it delivered to Trump after he won the 2016 election. While payday lenders weren't lining up to support Trump during the presidential election, in January after Trump's win, Advance America, the nation's biggest payday lender, donated $250,000 to Trump's inauguration. Title loan magnate Rod Aycox and his wife each donated $500,000 for the event; payday lender Checks into Cash chipped in another $25,000. In November, the Community Financial Services Association of America, the industry's trade group, announced its annual conference and expo would be held at the Trump National Doral resort in Miami. Read more at NEWSWEEK
O_Keefe _ O_Malley
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