Lawmakers Across The Aisle Urge CFPB To Relax Payday Rule

In a rare moment of bi-partisan agreement, House members sent the CFPB a letter last week to explicitly request the agency rethink some of its proposals to rein in payday lenders (and other providers of short terms loan offerings) as they fear the net result will be a drop in credit availability for everyone.

“As the CFPB moves forward with the comment period, we relay our concerns that the rule, as currently constituted, has the potential to severely restrict access to credit that millions of Americans rely on,” said the letter signed by six Democrats and six Republicans. The letter also noted that part of the CFPB “protection mandate” is to make sure that “all consumers have access to markets.”

And, at least in the short-term space, it looks like access could be hampered by the rapid contraction that is coming.  Advocates have long said this is a good thing — given the often predatory nature of the products that trap consumers into a long-term cycle of debt that they can never really get away from. But supporters of the industry noted that actually, these loans don’t go on forever — they last about a year — and that without them many consumers would be facing outcomes far worse than a long repayment cycle.

“With a decimated short-term, small-dollar lending industry, and other financial service providers not able to fill the void, millions of working class Americans will be left with no viable alternative to access the credit they occasionally need to make ends meet,” the letter said. “The adverse effects of this proposal on consumers will be devastating.”

The letter comes after more than one hundred House Democrats sent a letter to CFPB Director Richard Corday on Wednesday commending the bureau’s work on the proposal and requesting a tougher ability to repay test.

The June proposal would create an exception to the ability-to-repay test for loans of $500 or less as long as they followed certain guidelines.

The letter from the twelve lawmakers was signed by Reps. Alcee Hastings, D-Fla.; Henry Cuellar, D-Texas; Bennie Thompson, D-Mich.; Collin Peterson, D-Minn.; Kyrsten Sinema, D-Ariz.; Brad Ashford, D-Neb.; Blaine Luekemeyer, R-Mo.; Steve Stivers, R-Ohio; Mick Mulvaney, R-S.C.; Patrick McHenry, R-N.C.; Andy Barr, R-Ky.; and Ann Wagner, R-Mo.