Over 1 Million Pro Payday Loan Letters Sent to CFPB
When the Consumer Financial Protection Bureau (CFPB) announced its proposal to create a federal regulatory framework pertaining to the payday loan industry and provided a 90-day window for comments, the federal consumer watchdog likely expected some pushback from the industry. It probably also expected that most of its comments would be in support of the new rules, or would at least demand tougher laws.
Did CFPB and director Richard Cordray think that most of the comments would be in favor of payday loans? That is exactly what happened.
When the 90-day window closed earlier this month, the CFPB received more than 1.4 million comments from the general public. And most of them were pro-payday loans.
According to a new report from Politico, the payday loan industry is ecstatic that it was able to submit approximately one million letters to the CFPB that argued against the 1,300-page rule and argued in favor of payday loans. It becomes even more interesting when you consider that they weren’t typical letters from payday loan businesses and industry trade representatives combating new rules.
In fact, the report notes, a lot of the protest letters were conducted by grass-root campaigns.
“We’re very pleased,” said Dennis Shaul, chief executive officer of the Community Financial Services Association of America, a trade group representing small-dollar, short-term lenders. “Now we all have to be concerned about whether they’re all going to be opened, read and put on their portal. They shouldn’t begin their meditative period of time that’s meant to get them toward the final rule until everyone has had a chance to comment.”
Whether or not the CFPB will accept the letters as legitimate remains to be seen. But already there is some push back against the push back itself. At least according to the Stop the Debt Trap campaign, a coalition of consumer groups that favors tough rules on payday lending. The group alleges that most of the pro-industry comments came under duress and coercion and that they shouldn’t be considered.
Oregon Democratic Senator Jeff Merkley believes that most of the comments in defense of payday loans were in fact produced by payday lenders themselves. However he did not provide any evidence to back up his claim that businesses that offers payday loans online created these letters. The senator just suggested that he experienced the same thing in his home state.
He may need to retract his comments because at least two federal agencies urged the CFPB to reconsider its position. The National Credit Union Administration (NCUA) and the Small Business Administration (SBA) wrote to the federal agency saying that many people rely on payday loans.
“Imposing these strict regulations may deprive consumers of a means of addressing their financial situation,” the SBA wrote. “The CFPB has underestimated the potential economic impact of this rulemaking on small entities.”
The CFPB has said since June 2 that it will finalize its ruling after it peruses the comments. After that, experts project that the rules could be enacted as early as next year. That is if members of the House can fight against the pushback that some Republicans are putting forward.