Trade group threatens to sue CFPB over payday loan rules

Trade group threatens to sue CFPB over payday loan rules
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A financial services trade group is threatening to sue the Consumer Financial Protection Bureau (CFPB) over its proposed payday lending rules, just hours after their release.

Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), said the grounds for a lawsuit are substantial.

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“If it’s necessary after the public comment period, then indeed, we will sue,” he said.

The rules released Thursday aim to crack down on predatory payday lenders, but Shaul said they will have the adverse effect of wiping out an industry that provides an important source of credit for millions of Americans who live paycheck to paycheck.

Shaul said his group could bring a lawsuit challenging whether the bureau properly weighed the efforts of the states or its administrative proceedings. Though the D.C. Circuit Court of Appeal is weighing the constitutionality of the CFPB, he said his group could have a constitutional claim as well.

While the financial trade group threatened litigation, proponents were calling on the bureau to make the rules even stricter.

"While this is an important step in the right direction, the fight is far from over,” Karl Frisch, executive director of Allied Progress, said in a statement. “Payday lenders have spent tens of millions of dollars currying favor with powerful politicians and they will do whatever it takes to keep this predatory racket running. We owe it to hard working men and women everywhere to remain vigilant and fight on until the debt trap is ended once and for all.”

The rules, which will force lenders to consider a borrower’s ability to repay a loan or structure payments in a way to pay down the principal, drew support from Democratic presidential front-runner Hillary ClintonHillary Diane Rodham ClintonDe Blasio pitches himself as tough New Yorker who can take on 'Don the con' From dive bars to steakhouses: How Iowa caucus staffers blow off steam Warren policy ideas show signs of paying off MORE and lawmakers such as Sen. Dick DurbinRichard (Dick) Joseph DurbinLet's stop treating student borrowers like second-class citizens Trump's immigration push faces Capitol Hill buzzsaw Hillicon Valley: Trump takes flak for not joining anti-extremism pact | Phone carriers largely end sharing of location data | Huawei pushes back on ban | Florida lawmakers demand to learn counties hacked by Russians | Feds bust 0M cybercrime group MORE (D-Ill.), who referred to the rules as the “the right thing to do to protect working families and consumers.”

“Payday lenders offer a quick way to make ends meet, but often with devastating consequences,” he said in a statement. “Lenders are, in many instances, making these loans knowing that the consumer does not have the ability to repay them. This forces borrowers to choose between default and repeated borrowing, which perpetuates a cycle of debt.”