Time Running Out for Congress to Stop CFPB’s Small Dollar Loan Rule

FILE – In this March 26, 2015, file photo, Consumer Financial Protection Bureau (CFPB) Director, Richard Cordray, speaks during a panel discussion in Richmond, Va. The CFPB is considering banning a practice known as forced arbitration for financial services. (AP Photo/Steve Helber, File)

Democrats in Washington think they know best. That’s why they created the Consumer Financial Protection Bureau (CFPB). They trust the judgment of bureaucrats making $118,000 (the average CFPB salary) over that of single mothers, low-income workers and the bulk of Americans that earn just a fraction of that in a year. Democrats in Washington think everyone should live like them – regardless of if they want to or not.

That’s why Democrats in Washington regulate things they find distasteful.

That is the gist of what happened with the CFPB’s small-dollar loan rule, which will effectively ban small payday loans made to low-income workers in the case of a financial emergency. These loans typically range from $200 to $1,000, but can be the difference between someone paying for a car repair or missing a rent payment.

That’s not hyperbole. As Daniel Press of the Competitive Enterprise Institute writes in the Washington Times:

Take the example of Ariane, a 22-year-old single mother from Oakland, California, whose story is told in University of Pennsylvania Professor Lisa Servon’s book, “The Unbanking of America.” Ariane’s car broke down on the way home from work in 2013. Working a low wage job and without any access to credit, she lacked the money to fix it, but she desperately needed that car to get to work. Ariane faced a tough decision: Default on her rent to pay for the car and face eviction, or lose the ability to get to work and possibly lose her job.

Instead, Ariane took out a number of payday loans. They were expensive, and it was tough to repay them, but she fixed her car and kept her job, which meant she was able to keep her home as well.

Ariane is not alone. The sad truth is that most Americans do not have savings or a way to access even $1,000 in the case of an emergency.  From CNBC:

According to Bankrate’s latest financial security index survey, 34 percent of American households experienced a major unexpected expense over the past year. However, only 39 percent of survey respondents said they would be able to cover a $1,000 setback using their savings. […]

A similar 2016 GOBankingRates survey found that 69 percent of Americans had less than $1,000 in total savings and 34 percent had no savings at all.

The CFPB likes to believe it is “protecting” these folks with its small dollar loan rule. It isn’t. Instead, it’s leaving them adrift without a financial life preserver in an emergency.

As we reported previously, the Wall Street Journal has opined, prohibiting these loans only hurts the very people the rule was allegedly intended to help:

The CFPB on Thursday finalized its rule regulating the pay-day market. These short-term loans are typically for less than $500 and carry fees of $15 per $100 borrowed. Many low-income Americans use them to pay for emergencies or bills that are due between paychecks… These restrictions may seem well-intended, but they in effect allow loans only to unprofitable customers with good credit and prevent lenders from taking recourse against borrowers who don’t pay their bills. As a result, many Americans will lose access to an important source of emergency cash.

What’s worse, this rule has been a solution in search of a problem from the get-go; an issue chosen by the politically ambitious — he quit the CFPD to run for governor of Ohio, former CFPB Director Richard Cordray to advance his and Sen. Elizabeth Warren’s Liberal political agenda. Thanks to the crafty language of Dodd-Frank, his power and his agency were left unchecked and afforded no congressional oversight — until now.

That’s why Congress must step in. And it needs to act quick – time is literally running out for Congress to use the Congressional Review Act to end the CFPB’s misplaced small-dollar loan rule once and for all.

The CFPB published its onerous Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule, also known as the Small-Dollar Loan Rule, into the Federal Register, on November 17, 2017. That starting a 60-day clock for Congress to act and stop the harmful rule.

Under the Congressional Review Act of 1996 (CRA), Congress may disapprove of a broad range of regulatory rules issued by federal agencies by enacting a joint resolution of disapproval, the only limitation being that Congress can only utilize the CRA within 60 legislative days of notification.

Congress can finally reign in the CFPB with the use of the CRA and exercise its oversight authority over this out of control agency. After six years of regulatory abuse by the CFPB, will Congress finally act?