Some 43 Democratic senators are blasting Acting CFPB Director Mick Mulvaney's backtracking on the agency's payday lending rule and enforcement.

In a letter, the Democrats, led by Sen. Richard Durbin (D-Ill.), said reconsideration of the payday lending rule and Mulvaney's loosening of its enforcement are “antithetical to the CFPB's mission.”

At the same time, Sen. Lindsey Graham (R-S.C.) has introduced a resolution in the Senate to nullify the payday lending rule.

The CFPB issued rules in October to crack down on payday lending that lock borrowers into interest rates and fees that are so high that they have to take out additional loans. The rules were issued by former CFPB Director Richard Cordray, who was appointed by former President Obama.

The rules exempted small-dollar loans modeled after the NCUA's Payday Alternative Loan program.

When Cordray resigned to run for Ohio governor, President Trump tapped Mulvaney to serve as director until he nominated a permanent director.

Shortly after taking office, Mulvaney announced that the agency will be revisiting the rule and delayed one deadline built into it. In addition, the agency has backed down from some investigations of payday lenders.

Those decisions have incensed Democrats.

“Research has shown that short-term payday loans trap consumers in high-interest debt for long periods of time and can result in serious financial harm, including increased likelihood of bankruptcy,” the 43 senators wrote.

They said the agency's own research demonstrates the problems with the loans.

“The majority of all payday loans are renewed so many times that borrowers end up paying more in fees than the amount they originally borrowed,” they wrote. “This predatory business model exploits the financial hardships facing hard working families, trapping them into long-term debt cycles.”

While the Democrats are pushing for strict regulation of the payday lending industry, some Republicans are going in the opposite direction.

The House Financial Services Committee recently approved legislation that would exempt all banks and credit unions from payday lending regulation. However, banking regulators, including the NCUA, would be required to develop guidelines for short-term loans.

In addition, Graham has introduced a resolution that simply would void the CFPB's payday loan rule. The resolution would require a simple majority in both Houses and was introduced under the Congressional Review Act, which allows Congress to nullify agency rules within a specified time after they are released.

A similar resolution has been introduced in the House.

Instant Insights /

Democratic Senators Attack Mulvaney's Decision to Loosen Payday Loan Enforcement

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