Consumer bureau takes first step to revising payday lending rule

Consumer bureau takes first step to revising payday lending rule
© Greg Nash

The Consumer Financial Protection Bureau (CFPB) announced Tuesday that it would accept applications from lenders to waive the first deadline for complying with its payday lending rule.

The move comes as acting CFPB Director Mick MulvaneyMick MulvaneyTrump to nominate Russell Vought as budget chief Warren, Brown press consumer bureau on auto lending oversight Bottom line MORE and staff consider changes to the agency's hallmark rule.

The rule, aimed at protecting consumers from incurring crippling debts through short-term, high-interest loans, took effect on Tuesday.

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Finalized last year under former CFPB Director Richard CordrayRichard Adams CordrayJustices spar over fate of consumer agency To understand true impact of proposed interest rate caps, listen to history and borrowers Democrats blast consumer bureau over student loan oversight agreement with DeVos MORE, it imposes limits on how frequently a lender can offer, collect on and extend high-interest loans with deadlines of only a few weeks.

The bureau said in a statement that it would accept applications to waive the April 16 deadline for lenders subject to the rule to register with the bureau. Lenders have until Aug. 19, 2019, to comply with most other provisions.

The waivers would give the CFPB more time to finish their review and anticipated revision of the rule before lenders would have spent resources preparing to follow it.

The rule was lauded by progressives. Supporters say it would prevent shady lenders from trapping vulnerable customers into compounding debt they’ll never be able to repay.

But Republicans and the financial sector, both frequent CFPB critics, say the payday rule is a misguided attempt to curb consumer debt. They say it would instead cut off a crucial financial lifeline for low-income communities.

House Republicans introduced a resolution under the Congressional Review Act to repeal the payday rule and bar the CFPB from issuing another similar measure. The repeal effort seems safe to pass the House along party lines, but could face trouble in the Senate.