Democrats flip on ‘pay­day’ crack­downs

Pri­mary fights push high-pro­file law­mak­ers to left

The Washington Times Weekly - - Politics - BY TOM HOW­ELL JR.

Democrats are rush­ing to em­brace the Obama ad­min­is­tra­tion’s new rules de­signed to crack down on short-term “pay­day” lenders, in­clud­ing even some erst­while high-pro­file op­po­nents, as the party’s anti-Wall Street left wing flexes its mus­cle.

The Con­sumer Fi­nan­cial Pro­tec­tion Bureau has pro­posed the rules, which would re­quire short­term lenders to meet stan­dards sim­i­lar to those for banks, draw­ing quick praise from the party’s pres­i­den­tial con­tenders.

More strik­ing, though, were the state­ments of sup­port from Reps. Deb­bie Wasser­man Schultz and Pa­trick Mur­phy, two Florida Democrats who pre­vi­ously op­posed such a move and spon­sored a bill de­signed to block the pay­day rules from tak­ing ef­fect.

“As a strong sup­porter and part­ner of the Con­sumer Fi­nan­cial Pro­tec­tion Bureau in Congress, I stand with the CFPB in its ef­forts to pro­tect Amer­i­cans from preda­tory lend­ing,” said Ms. Wasser­man Schultz, who is also chair­woman of the Demo­cratic Na­tional Com­mit­tee. “From the out­set of this process, I have said that I trust the CFPB to do what’s right for con­sumers, and these pro­posed rules are an im­por­tant step towards that crit­i­cal goal.”

She and Mr. Mur­phy are locked in pri­mary races — Ms. Wasser­man Schultz for her House seat and Mr. Mur­phy for the state’s open Sen­ate seat — and lib­eral groups said it was no sur­prise that they flipped, given the in­creas­ing level of controversy over pay­day lend­ing.

“This is a wake-up call for pro­gres­sives in Congress and ev­ery state leg­is­la­ture around the coun­try. Get­ting in bed with the pay­day lend­ing in­dus­try isn’t only bad pol­icy, it’s bad pol­i­tics,” said Karl Frisch, ex­ec­u­tive di­rec­tor for Al­lied Progress, which had been run­ning tele­vi­sion and dig­i­tal ads blast­ing Ms. Wasser­man Schultz and Mr. Mur­phy for their sup­port of Florida’s pay­day lend­ing laws.

Pay­day lenders of­fer short-term loans, typ­i­cally due within sev­eral weeks, while charg­ing high in­ter­est rates. But the CFPB, an out­growth of the 2008 fi­nan­cial cri­sis, says seven in 10 bor­row­ers can’t re­pay on time and bor­row more, spark­ing a cy­cle of mount­ing fees and in­ter­est that amounts to a “long-term debt trap.”

The rules pro­posed last week re­quire lenders to make sure cus­tomers can re­pay what they bor­row. Also, lenders can­not use post­dated checks to re­peat­edly try to debit money from con­sumers’ bank ac­counts be­cause that can trig­ger penal­ties for in­suf­fi­cient funds.

Congress can try to stop the rules, but it is un­clear whether Repub­li­cans will take that step. They are gen­er­ally crit­i­cal of the pro­posal.

“Noth­ing has been sched­uled at this time, but it’s very pos­si­ble the com­mit­tee will take some ac­tion,” said Jeff Emer­son, spokesman for the House Fi­nan­cial Ser­vices Com­mit­tee.

The Repub­li­can-led com­mit­tee had Demo­cratic al­lies in Ms. Wasser­man Schultz and Mr. Mur­phy. Both spon­sored the Con­sumer Pro­tec­tion and Choice Act in­tro­duced by Rep. Den­nis A. Ross, Florida Repub­li­can, that would stave off CFPB pay­day rules for 24 months and shield states like Florida, which forged its own rules to li­cense and reg­u­late pay­day lend­ing, from hav­ing to ac­cept fed­eral reg­u­la­tions.

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