Conservative leaders are taking action to put a stop to a new rule on payday lending. This rule has been put together with the blessing of the Obama administration, and directly, aggressively attacks the rights of individual states. Conservative members from the House Financial Services Committee leveled accusations against the Consumer Financial Protection Bureau (CFPB) of making attempts to “preempt” existing state laws in the bureau’s efforts to introduce new regulations that are focused on the short term lending industry.
The Director of the CPFB Richard Cordray told this committee that the rule would be taking effect this spring, but that the rule was not founded on preemption. He stated that it would be centered on putting new minimum standards in place that would ultimately “seek to eliminate predatory practices that embroil many consumers in a debt trap.”
When the federal government takes action to preempt state laws, it can boil down to the statute being overlooked. This was noted by Representative Brad Sherman, a Democrat, in his talks with Representative Mick Mulvaney, a Republican.
Sherman said, “To preempt means to prevent the state law from being effective. To supplement, you have to obey the state law and you have to obey the federal law. If the federal law requires me to wear a belt, state law requires to me wear both suspenders, I will wear both,” he added.
This bit of wisdom from Sherman, however, did little to sway Republicans. They were often on the borderline of being hostile when they grilled Cordray. Some Democrats are also quite critical of the CFPB’s efforts to put new levels of pressure on short term lending companies.
Recently, some of those very Democrats have been criticized by those that toe the line in their party. This all started to happen after a piece was published in the Huffington Post on the issue. This story broke news about the Democratic National Committee Chair Debbie Wasserman-Shultz’s co-sponsorship of legislation that goes up against the CFPB. This bill is meant to give states that have solid short term lending legislation in place to be exempt from new payday regulations and rules handed down by the CFPB.
Florida, in particular, is known for having tough payday lending laws. This state’s rules have been touted by some Republican leaders. Representative Dennis Ross, the author of the bill was angry when Cordray did not describe the Sunshine State as the “gold standard” for this type of industry regulation.
Cordray responded, “There’s been analysis of the Florida model, and what it shows is that these loans are still being made at above a 300 percent rate of interest, and they’re being rolled over on an average of nine times for many consumers. Loans repeatedly rolling over is a sensitive issue with Cordray and others who support his proposed payday lending rules. These folks refer to these types of loans as being the cause of “debt traps.”
Ross’s proposal has been garnering a lot of support from members of the Florida Congressional delegation. With supporters from both sides of the political fence finally showing that they are serious about squashing the CFPB’s payday lending regulations, the tide may have finally started to turn in the payday lending industry’s favor. For some time, it has seemed like doom and gloom was in the future for these types of lending companies. Now it looks like some sunlight may be starting to shine through at long last.