Flashback Friday: The Payday Rule

By Marisabel Torres, Senior Policy Analyst, Economic Policy Project, NCLR

What a difference a year has made for consumers. A year ago today, consumer advocates celebrated the Consumer Financial Protection Bureau (CFPB)’s release of a proposed rule to reign in the worst abuses of payday, car title, and other high-cost debt trap lending schemes. For too long, predatory businesses targeted communities of color and other consumers who had limited access to credit with loans and promises of quick cash to help make ends meet. Because these businesses have been unregulated, they have gotten away with charging exorbitant fees and structuring their loan products to keep consumers in a cycle of debt. After hearing the countless experiences from consumers who were victims of these debt traps, the CFPB, an agency that was established with the sole mission of keeping the financial marketplace transparent and fair, stepped in and proposed a rule to stop these harmful practices.

Fast-forward to today: Congress stands poised to not only roll back the CFPB’s ability to regulate these businesses, but the very existence of the CFPB is threatened by an upcoming vote on the Financial CHOICE Act, H.R. 10. This legislation—dubbed the WRONG Choice Act by consumer advocates—will undo years of positive regulatory work intended to make sure payday lenders and other bad actors stay off the market, and that we don’t face the same conditions that led to the Great Recession.


In addition to giving special cover to payday lenders, this bill—whose author, Rep. Jeb Hensarling of Texas, has taken more than $5 million from financial services companies—would:

    • Strip the CFPB of its authority to identify and regulate unfair and deceptive financial practices—the kind of activity the led to the financial crisis.
    • Repeal a rule that requires investment advisers to act in the best interest of their clients. This rule is estimated to have put $17 billion back in the pockets of retirement savers—without it, that money would instead have lined the pockets of corporations.
    • Make it easier for companies to win in court when consumers charge them with wrongdoing.

Clearly, this bill is bad not only for Latinos, but for all consumers. Payday lenders have, for far too long, preyed on communities of color by blighting our neighborhoods with their storefronts and targeting low-income families. We need the CFPB to issue a strong payday rule, now more than ever, and we reject all attempts by Congress to limit the consumer agency’s authority to curb these predatory loan sharks.

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