| The U.S. House Financial Services Committee yesterday approved legislation that would change the payday lending rule, according to Credit Union Times.
Though it faces an uphill climb, if it becomes law, it would significantly dial back the initial payday rule, which proposed requiring lenders to determine upfront whether people can afford to repay these types of loans.
A payday loan is a small, short-term and unsecured loan, typically with high rates that must be repaid in a few weeks or typically on the borrower’s next payday, hence the name. The products have received criticism for squeezing borrowers already in tight financial situations.
The decision to try to revise or repeal the rule illustrates the dramatic shift in the consumer watchdog agency since President Donald Trump named Mick Mulvaney as director.
Sen. Elizabeth Warren, who helped create the CFPB, has widely criticized this shift by the agency and the reverse course on the payday rule.
“Payday lenders spent $63,000 helping Mick Mulvaney get elected to Congress and now their investment is paying off many times over,” she said in a statement back in January when the CFPB announced it would revise the rule. “By scrapping this rule, Mulvaney will allow his campaign donors to continue to generate massive fees peddling some of the most abusive financial products in existence.”
Not all have been opposed to the change ,though.
“The CFPB’s decision to revisit its small-dollar rule is welcomed news for the millions of American consumers experiencing financial hardship and in need of small-dollar credit,” Richard Hunt, president and CEO of the Consumer Bankers Association, said in a statement in January.
