In January, President Trump suspended a rule proposed by the Obama administration that would have all but wiped out consumer loans from payday, title or online lenders by requiring them to “reasonably determine that the consumer has the ability to repay the loan.”
It also would have limited the interest rates payday lenders could charge, handcuff its ability to collect on past-due loans and prohibit withdrawing money from a customer’s checking account without prior approval, which would allow those trying to escape payment to simply move or withdraw their money.
The final measure, according to the Nation at the time, would have removed two-thirds of the profits from the industry.
In addition, the president has ordered, through the Office of Comptroller of the Currency, a series of steps to encourage traditional banks to re-enter the small-dollar consumer loan sector.
“Banks in the past have tried to offer these loans and found them unprofitable,” said Dennis Shaul, CEO of the Community Financial Services Association of America, a bank trade organization, and few expect banks to re-enter the market.
Trump’s moves to make credit more available to underserved working-class customers does not please the media, who say the loans create debt traps and it’s better to lose your car, home or job than accept one.
“Watchdog groups are up in arms because, under [former Republican Rep.] Mick Mulvaney, the CFPB has put on hold a rule that would restrict payday lenders and their high-interest-rate loans,” wrote NPR. “Critics say these moves are payback for campaign contributions to Mulvaney when he was a congressman representing South Carolina.”
It quotes Mike Calhoun, president of the Center for Responsible Lending, a lending industry front group founded by liberal financier Herb Sandler, as saying it is “outrageous” for Mulvaney to lead the Consumer Finance Protection Bureau, which, under the Obama administration, spearheaded the regulatory war on consumer lending.
“Mulvaney is deep in the pocket of the payday lenders, and he’s doing everything he can to help them,” Calhoun said. The Post failed to report how Calhoun’s organization is funded or what interests it may have in restricting payday loans.
The Washington Post also hit the bribery angle in a piece Thursday. Pastors advocating for changes in state law in Florida to make credit more readily available for their parishioners were in Tallahassee to lobby only after “having been recruited by Amscot,” a payday lender that operates in the state.
Some of the pastors who went to Tallahassee rode on a plane provided by Amscot, but many did not. And the pastor out front in the Post story said he was not offered anything for his support and provided his own transportation.
Support for regulating the industry is well meaning; support for making credit more available to underserved populations is bought off by the industry. The possibility that Big Banking wants its competitors limited or eliminated never enters the discussion.
“The federal Consumer Financial Protection Bureau has spent years developing industry regulations addressing concerns that borrowers were being trapped in debt,” wrote the Washington Post. “In response, some payday lenders have sought to build support for their business by forging relationships with black churches. Black churches have a long history of helping congregations find financial footing, historians say.”
The Post then repeated the biased act of NPR.
“Most of the pastors interviewed for this story said they received no compensation for their support of payday lenders, though several said the industry’s donations to local nonprofit and advocacy groups they supported had endeared them,” it wrote. “One minister acknowledged that a payday lender had given a small contribution to his church.”
It then quoted a pastor from Ohio who opposes payday loans as saying, “We hear stories from people who become suicidal because of these loans.” That pastor was not asked whose contributions “endeared” him to the cause.