Consumer Bureau’s Leader Sides With Payday Lenders
Payday lenders fought, and lost, a battle to block new federal rules curbing short-term loans that critics say can trap people in cycles of debt.Posted — Updated
Payday lenders fought, and lost, a battle to block new federal rules curbing short-term loans that critics say can trap people in cycles of debt.
Now, with the restrictions scheduled to take effect next year, the lenders have moved their fight to the courtroom, and have gained a powerful ally: the Consumer Financial Protection Bureau, which wrote the rules the industry is seeking to overturn.
In a joint motion filed late last week in federal court in Austin, Texas, Mick Mulvaney, the bureau’s acting director, sided with two industry trade groups suing the agency. The bureau asked a judge to delay the rules until after the industry groups’ lawsuit is resolved, which may take years.
By then, the entire issue could be moot: Mulvaney has said he intends for the bureau to reconsider, and perhaps repeal, the rules. To do that, the agency has to follow a formal administrative process, which it has said it plans to begin by February.
Consumer groups that favor the new rules complained that the court filing appeared intended to delay the restrictions long enough for the bureau’s new leadership to kill them before they take effect.
“In order to reopen a rule, you have to go through the same process you did to create it,” said Linda Jun, a senior policy lawyer for Americans for Financial Reform. “You have to give notice and let the public say their piece. You don’t get to say, ‘I just don’t like it, so I’m going to do a legal end run around it.'”
The Community Financial Services Association of America, a trade group and one of the plaintiffs in the case, said it was pleased that the bureau planned to reconsider what it called an “arbitrary and capricious” rule.
“It makes no sense to force companies to comply or prepare to comply with a rule that may never take effect,” said Dennis Shaul, the group’s chief executive.
The other plaintiff is the Consumer Service Alliance of Texas.
The consumer bureau declined to comment on its court filing. Mulvaney, who took temporary command of the agency one month after the short-term-loan rules became final, has dropped several of the agency’s lawsuits against payday lenders and has taken a softer stance toward the industry than his predecessor did.
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