Trump Admin To Roll Back Consumer Protections For Payday Loan Industry

Screengrab/Senator Doug Jones/YouTube

The Trump administration has gutted an Obama-era rule meant to protect low-income Americans.

The Wall Street Journal reported that on Wednesday, the Trump administration will propose to "remove a lending requirement that would have made it difficult for companies to offer high-cost consumer loans." The Obama-era rule was meant to protect lower-income Americans and it was the first federal effort to regulate this type of short-term lending. The Consumer Financial Protection Bureau said it would postpone the date when the payday lending rule is to go into effect until November 19, 2020.

Payday and auto-title lenders have lobbied for years to block the Obama payday-lending rule, claiming that the regulation would ruin their businesses by inflicting burdensome requirements to determine the likelihood that customers can repay the loan.

“The bureau’s proposal suggests there was insufficient evidence and legal support for the mandatory underwriting provisions in the 2017 final rule,” the CFPB said, explaining the reasons for the revision. The CFPB also said that the bureau is concerned that the requirements would reduce access to credit and competition.

The new proposal is one of the first major policy announcements by Kathy Kraninger, the new director of CFPB.

Kraninger has not “formed any conclusion as to where this will go,” said a CFPB official. “She has an open mind and…wants to review the comments that come in.”

The announcement could start a period of uncertainty in the small-dollar industry. Consumer advocates and democratic lawmakers have criticized the intent to reverse the rule and will try to block the changes.

The new payday-lending plan removes the *"*provision to require an underwriting process for a loan that proves the borrower can afford the loan payments but still meet basic living expenses and obligation." This requirement would have made it difficult, if not impossible, for those borrowers with a poor credit history living paycheck to paycheck to get payday loans.

The bureau will leave the “payment provisions” of the rule intact. This provision banned lenders’ repeated attempts to collect payments by debiting a borrower’s bank account.