Consumer Financial Protection Bureau’s Payday Loan Rule Survives GOP Repeal — for Now

There was rare good news for regulatory safeguards this week: The window closed for Congress to pass legislation repealing the Consumer Financial Protection Bureau rule on payday loans, according to advocates of the initiative.

Stop the Debt Trap, a coalition of labor unions and non-profits, said Wednesday evening that the “legislative clock has expired” on efforts to annul the rule under the Congressional Review Act.

“Consumer and civil rights advocates are urging the consumer bureau to keep intact the rule, which is set to go into effect summer 2019, and to fulfill the bureau’s responsibility to enforce the law,” the organization said in a statement.

The rule is centered around the idea short-term, high-interest lenders must try to ensure that borrowers can afford to make payment on their products. It was finalized last October by then-CFPB Director Richard Cordray, an Obama-appointee. Federal law prevents the CFPB from imposing any kind of cap on interest rates.

Since Trump was inaugurated, Republicans have used the Congressional Review Act fifteen times to successfully repeal rules passed by the Obama administration or its appointees. That includes one law enacted to take down a CFPB rule outlawing contracts that bar cheated consumers from seeking damages in class action lawsuits.

Only four Senators have cosponsored the CRA bill on the bureau’s payday rule — Lindsey Graham (R-S.C.), Pat Toomey (R-Pa.), Joni Ernst (R-Iowa), and Ted Cruz (R-Texas).

The Senate and the House have also recently passed legislation nullifying a five-year old CFPB guidance to indirect auto-lenders — on how to comply with laws against racial discrimination in lending.

Though the time limit to bring repeals under the CRA is 60 legislative days, the Government Accountability Office said in December that the guidance qualified as a rule for repeal under the law.

While Congress appeared on Wednesday to officially spare the payday rule, hours earlier, there was an ominous development in Washington for consumer safeguards. In a party-line vote, the Federal Trade Commission voted 3-2 to approve Andrew Smith as head of the agency’s Bureau of Consumer Protection.

Smith has previously served as a lawyer for some of the most recognizable corporations accused of malfeasance, as noted Monday by Sens. Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.), and Brian Schatz (D-Hawaii).

“Mr. Smith is well known in Washington for his representation of Equifax, Facebook, Uber, and other companies that have been accused of some of the worst abuses of consumers–a record that leaves him unfit and unable to function as the FTC’s top consumer advocate,” the lawmakers said.

Smith has also served as a lawyer for payday lender AMG services. As The New York Times noted on Wednesday, the company found itself in legal trouble due to “predatory practices against impoverished borrowers.” Those practices led to $1.3 billion in fines from the FTC itself.