The Consumer Financial Protection Bureau is proposing to repeal a rule that protects borrowers from exploitative payday lending practices. We submitted comments focusing on CFPB’s failure to provide a reasoned explanation for reversing key legal and economic conclusions of the rule.
The “Payday Lending Rule” applies to certain short-term loans and requires lenders to determine, before making a covered loan, that the consumer has the ability to repay it. Issuing loans without making that determination, CFPB had argued, was an unfair and abusive practice. But in its proposed repeal, CFPB now claims that its prior conclusions lacked sufficient support. CFPB’s new analysis highlights cost savings to lenders while ignoring forgone benefits to borrowers. Our comments criticize how the proposal treats benefits and costs inconsistently, ultimately providing misleading analysis that fails to show how the repeal is net beneficial. CFPB does not adequately justify the repeal of the Payday Lending Rule’s requirement that lenders assess borrowers’ ability-to-pay before extending credit that could potentially begin a costly cycle of re-borrowing.