Horowitz: Trump Administration Rolls Back Pay Day Lending Safeguards

Tuesday, February 26, 2019
Rob Horowitz, GoLocalWorceser MINDSETTERâ„¢

President Donald Trump
Continuing its unfortunate transition of The Consumer Financial Protection Bureau (CFPB)  from an agency that protects consumers from unethical business practices to one that puts the interests of businesses first, no matter how their practices may negatively impact consumers, the Trump Administration is proposing significantly weakening rules designed to eliminate the worst abuses of payday lenders.

More specifically, the CFPB proposes to rescind a regulation scheduled for implementation in August requiring payday lenders to ensure that borrowers can afford the loans that they are taking.  As CNBC reported, “ the CFPB finalized a new, multipart payday loan regulation in 2017 that, among other things, required payday lenders to double-check that borrowers could afford to pay back their loan on time by verifying  information like incomes, rent, and even student loan payments.”

This rule is needed because payday loans are a form of legalized loan sharking with interest rates that average nearly 400 %. People are often trapped into an endless cycle of debt as they take out loan after loan to pay off the interest incurred on the previous loan. Lenders offering these short-term loans tiding people over to their next payday either in storefronts or online prey on our most vulnerable citizens.  

The use of these loans is widespread, putting millions of Americans at greater financial risk. Twelve million Americans take out a payday loan every year. They are used disproportionately by younger Americans with 13% of millennials saying that they have taken a payday loan out in the past two years, according to a Morning Consult poll.

 Experts and consumer advocates have weighed in strongly in opposition to CFPB’s proposal to roll back these rules. “This proposal to remove critical safeguards would let payday lenders rely on their ability to withdraw payments from borrowers’ checking accounts rather than setting payments that they know borrowers can afford,” commented Alex Horowitz (no relation), Senior Research Officer for Pew Research Center’s Consumer Finance Project. “Eliminating these protections would be a grave error and would leave the 12 million Americans who use payday loans every year exposed to unaffordable payments at interest rates that average nearly 400 percent. “

Former CFPB Director Richard Cordray, who oversaw the development of the payday loan regulations during the Obama Administration responded to the decision to rescind the rules by tweeting: “It’s a bad move that will hurt the hardest-hit consumers. It should be and will be subject to a stiff legal challenge.”

Established in the wake of the 2009 financial crisis, the CFPB was working as intended, providing needed protections for consumers and holding financial institutions accountable through lawsuits and sensible regulations.   

Doing the bidding of the payday lending industry is one of many examples of the CFPB under the Trump Administration abandoning its mission of consumer protection.

It is important for the public to send a strong message that this is simply unacceptable.  One way to do so is by submitting a comment to the CFPB during the current 100 day comment period underway, expressing strong opposition to the weakening of the payday lending rules. I urge everyone who is outraged by this decision to do so. 


Rob Horowitz is a strategic and communications consultant who provides general consulting, public relations, direct mail services and polling for national and state issue organizations, various non-profits and elected officials and candidates. He is an Adjunct Professor of Political Science at the University of Rhode Island.

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