CFPB’s Payday Advance Loan Limits Draws Quieter Response than the Arbitration Rule

More than 3 weeks have passed since the CFPB finalized its rule for placing limits on payday advance loan. However, there are mixed signals among the GOP lawmakers about whether the members of the Congress will support the financial companies that oppose this regulation – unlike the battle that they waged in order to block a separate CFPB rule on mandatory arbitration clause.cfpb
There was skepticism among the lawmakers, as well as, the financial firms regarding the small-dollar lending regulation when the rule was pending. But, when the rule was finalized and released on 5th October, the financial service industry addressed it with divided response. In general, the big banks stopped criticizing when the CFPB eased the restrictions on small lenders like, credit unions while the payday lending industry and Consumer Banks Association cried foul.
The groups representing the financial services industry were prompt and unified in denouncing the CFPB regulation when it was finalized on 10th July because it interfered with their ability to require arbitration in order to settle legal disputes brought by the customers. The Congress had announced within 10 days that it had plans to introduce the Congressional Review Act resolutions to stop the regulation. After Vice President Mike Pence broke a tie in the Senate to half the rule, they succeeded on 24th October.
In the Federal Register, the payday rule has not been published yet. Publication in the Federal Registrar is a prerequisite for it to become a force. The spokesperson for CFPB said that it has been submitted for publication. Once the rule has been sent to the Congress, a lawmaker has sixty calendar days to introduce a CRA resolution as per the Congressional Research Service.
A spokesman for the House Financial Services Committee, Jeff Emerson, said that Jeb Hensarling (R-Texas), the committee Chairman, wants a CRA resolution to go ahead, but it has not been planned yet. When asked the reason behind the lack of immediate action regarding a CRA, the pending Federal Register publication was pointed as the reason.
Reporters were told by Mike Crapo (R-Idaho), the Senate Banking Committee Chairman, that he does not wish to give any odds whether a CRA resolutions is probable in the Senate.
When asked why lawmakers have been quite slow to act, no comments were forthcoming from Crapo’s office.
Even though the response is slow, both proponents and critics of the rule are hopeful of a CRA resolution. The executive director of Financial Service Centers of America and a representative of the small-dollar lending industry, Ed D’Alessio, said that according to him, there is an appetite for a payday day rule CRA, especially after the success of the arbitration resolution.
In case a resolution is not forthcoming, the lending industry does have the option of attempting to block the rule, via litigation.
D’Alessio said that if a CRA resolution fails to overturn the rule, the industry will be pursuing litigation at some point of time. He added that the industry will also continue to pursue any other form of relief as possible in order to stop it from going into effect.
A campaign director at Americans for Financial Reform, Gynnie Robnett, said that there is everything at stake for the small-dollar lending industry and they are likely going to keep on pushing for a resolution.
Robnett said that according to her, the circumstances of the fight between the small-dollar lenders and CFPB is going to be much different than the arbitration fight. She emphasized that they are in a rather comfortable place to have the fight. The lack of unity in the stance of the financial services industry and the political disapproval of the payday lenders as predatory lenders was cited by her.
Financial Tips for Single MothersIndustry groups, outside of the small-dollar loan sector, who denounced the arbitration rule, have relatively kept quiet on the rule regarding payday loan. A spokesman for the Washington-based American Bankers Association, Jeff Sigmund, said that the organization will continue to engage with their members in order to determine if the final rule offers banks with adequate opportunity to provide small-dollar credit that the customers need to fulfill their needs.
Credit unions, who have not been subjected to the payday loan rule, have also said very little about the new CFPB regulation.
The chief advocacy officer for the Washington-based Credit Union National Association, Ryan Donovan, said that the payday advance loan is different from arbitration because the bureau tried to leave short-term small-dollar lending choices available, such as the ones offered by credit unions.