Bill aims to block Obama payday loan crackdown
A bipartisan group of lawmakers has introduced legislation to thwart President Obama’s crackdown on payday loans, while evidence has emerged that regulators at the Consumer Financial Protection Bureau conspired with left-leaning groups to draft their regulations against the industry.
In March the CFPB proposed payday rules to end what it calls “payday debt traps” by limiting the interest rates payday lenders can charge, prohibiting borrowers from taking out more than one loan at a time and by requiring lenders to assess the borrower’s ability to pay. Mr. Obama has long championed such reform, however, many states are upset with how the initiative has been handled at the federal level.
Florida, in particular, has criticized the CFPB for not considering its payday lending regulations as a model for the federal proposal. The state argues if the CFPB’s recommendations hold, the majority of Florida’s authorized payday lenders will be put out of business, and consumers will be forced into less regulated and more predatory products.
The entire Florida delegation, including Democrat National Committee Chairwoman Debbie Wasserman Schultz, wrote CFPB Chairman Richard Cordray this spring, urging him not to pursue a one-size-fits-all model in the agency’s rule-making. Representatives in the state later met with the director face to face to plead their case, where he reportedly was unsympathetic.
“They acknowledged there were some elements of the [Florida] model they liked, but they never made a commitment to adopting it,” Rep. Carlos Curbelo told The Washington Times. “In our view [the CFPB’s proposed payday regulations] are going to make it impossible or difficult to offer this kind of product, and people like me who represent a lot of low-income households and immigrants, these loans may mean the difference between keeping a car or losing a car, or they might just need a little extra cash.
“A lot of people use this product responsibly, and lot of others don’t, and we have to protect them,” said Mr. Curbelo, a Florida Republican. “We think Florida has reached this balance. This type of loan needs extra scrutiny, but that doesn’t mean it should be outlawed entirely.”
So some members of the delegation decided to take things into their own hands.
On Monday Rep. Dennis A. Ross, Florida Republican, introduced a bill dubbed the “Consumer Protection and Choice Act” with three Democrats and two Republican co-sponsors, all from his state. The legislation will exempt Florida from the federal payday lending regulations being crafted at the CFPB and give other states two years after the CFPB writes its rule to either choose it or the Florida model to implement.
“CFPB has proposed a one-size-fits-all policy on payday loans that would undo the work of Florida and other states to set a strong balance of consumer protection and access to short-term credit. This will force consumers to turn to more expensive alternatives or unlicensed lenders, as our entire delegation noted in our letter to CFPB Director Cordray in April of this year,” Mr. Ross said in a statement to The Times.
The bill has been assigned to the House Financial Services Committee, on which Mr. Ross serves. Its supporters range from liberal Reps. Corrinne Brown and Alcee L. Hastings to moderates like Mr. Curbelo and Rep. Patrick Murphy, Florida Democrat, and a conservative like Rep. Bill Posey, Florida Republican.