The Consumer Financial Protection Bureau this week said it will reconsider proposed rules for payday lenders that were scheduled to take effect Wednesday.
The CFPB drew them up under previous director Richard Cordray, who left the job to seek the Democratic nomination for Ohio governor. President Trump appointed budget director Mick Mulvaney to lead the bureau.
Cordray acknowledged in a December interview that it was possible that the CFPB could roll back the rules under Trump.
鈥淣ow what I did was, we finalized these rules, and we got them published, and they are now law of the land,鈥� Cordray said. 鈥淚f you鈥檙e going to undo them, you鈥檙e going to have to go through the same elaborate process we went through to make the rule.鈥�
, Cordray called the decision a 鈥渢ruly shameful action.鈥�
said it would 鈥渆ngage in a rulemaking process鈥� to reconsider the rules. In the meantime, the bureau dispensed with an upcoming application deadline and said it would 鈥渆ntertain waiver requests鈥� from applicants.
Income Checks And Limits For Repeat Lending
The CFPB rules would require lenders to check borrowers鈥� income to ensure they could pay back the loan and afford basic living expenses.
鈥淚n the cases that we see, our clients would not pass that test,鈥� said Katherine Hollingsworth, an attorney with the Legal Aid Society of Cleveland who works with payday borrowers. 鈥淭he lender would not be able to loan to that borrower, because the borrower would not be able to show the ability to repay the loan and cover life鈥檚 necessities.鈥�
Payday customers typically pay fees per hundred dollars borrowed and must pay back the loan within two weeks, which can equate to a high yearly interest rate. , the average annual percentage rate for some of Ohio鈥檚 largest lenders .
Another CFPB rule would require lenders to wait 30 days before lending to someone who has taken out three loans in quick succession.
Patrick Crowley, a spokesman for the Ohio Consumer Lenders Association, called the rules 鈥渁n overreach by the federal government,鈥� saying it would 鈥渞emove a very valuable source of credit to people who don鈥檛 qualify for loans from other institutions like banks.鈥�
Statehouse Considers New Payday Rules
Another candidate for governor, Attorney General Mike DeWine, 鈥渄oes believe there should be some reform in the area of payday lending,鈥� office spokesman Dan Tierney said.
DeWine, a Republican, hasn鈥檛 endorsed a specific approach.
A state legislative committee this week heard testimony on a proposal to limit payday loans to an effective annual interest rate of 28 percent. The measure, , was introduced last year by Republican State Rep. Kyle Koehler and Democratic State Rep. Mike Ashford.
It鈥檚 legislators鈥� second try in recent years at regulating the industry.
The Ohio General Assembly already passed such a limit in 2008, but no lenders signed up under the new rules. Instead, they gave out loans under a different part of state law鈥攁 practice the Ohio Supreme Court upheld in 2014.
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