A proposal rescinding the “ability to repay” provisions of federal consumer financial protection agency regulations on small-dollar “payday” lenders should itself be rescinded, the chair of the House committee with oversight of the agency said Wednesday evening.
In a statement, House Financial Services Committee Chairwoman Maxine Waters (D-Calif.) said she was “deeply troubled” with the proposal by the Consumer Financial Protection Bureau (CFPB) issued earlier Wednesday. That proposed regulation would rescind that portion of the agency’s rules (adopted in 2017) requiring that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. The bureau also said it “is preliminarily finding that rescinding this requirement would increase consumer access to credit,” the agency said in a release.
The proposed changes were released with a 90-day comment period (which begins as soon as the proposal is printed in the Federal Register). In addition to rescinding the “ability to repay” provision, the CFPB proposed to delay the Aug. 19, 2019, compliance date for the mandatory underwriting provisions to Nov. 19, 2020. That proposal is open to public comment for 30 days following publication in the Register.
“It is no secret that payday loans often lead to irreparable financial consequences for hardworking families, as they usually have interest rates of 300 percent or more, and borrowers frequently take out new loans to pay off old ones because the loans were never affordable in the first place,” Waters said in a press release. “This proposal essentially sends a message to predatory payday lenders that they may continue to harm vulnerable communities without penalty.”
The chairwoman of the powerful House committee – which has oversight of the consumer bureau – urged Director Kathleen (“Kathy”) Kraninger to rescind the bureau’s proposal changing the existing rules. She urged the consumer bureau leader to “work on implementing a comprehensive federal framework – including strong consumer safeguards, supervision, and robust enforcement – to protect consumers from the cycle of debt.”