Faced with CFPB’s plan to relax the rules governing payday loans, the House financial services committee is considering exploring legislation that would strengthen regulation, according to a memo produced by the committee’s Democratic staff.
The Financial Services Commission holds a hearing on payday loan Tuesday afternoon.
“Many payday and car title loans not only undermine wealth-building opportunities for vulnerable communities, but also force those who already have financial difficulties and underbanked into worse circumstances, including the loss of their assets. bank accounts, their vehicles or even bankruptcy, ”the Democratic memo. States.
In 2017, the CFPB, under the leadership of Richard Cordray, appointed by the Obama administration, issued strict rules governing payday lending. When President Trump took office, administration officials said they would relax the regulations.
The agency’s new director, Kathy Kraninger, has proposed eliminating the requirement that short-term lenders establish that a borrower has the ability to repay a loan before closing the deal.
Democrats attacked this plan, and Democratic committee staff highlighted three proposals in the memo:
- A bill for discussion presented at previous congresses. The plan would impose a 36% usury cap on all indefinite and closed consumer credit transactions, including mortgages, auto loans, overdrafts, auto title loans and payday loans. The bill would allow for an initial application fee and cost recovery from the lender. The proposal would not prejudge stricter state laws. The Military Loans Act imposes a 36% limit on loans to active duty military personnel and their families.
- HR 1285, presented by Financial Services Committee Member Rep. David Scott (D-Ga.). The legislation would create an office for underbanked, unbanked and underserved consumers within the CFPB. The office would establish strategies to improve access to credit for those who are likely to take out a payday loan.
- A plan by the Chairman of the House Consumer Protection and Financial Institutions Subcommittee, Gregory Meeks (DN.Y.) that would provide $ 10 million to fund Dodd-Frank’s small loan program. This program is administered by the Community Development Financial Institutions Program. The program, which was never funded, would provide assistance in creating loss reserves to support small dollar lending between CDFIs.