CFPB’s Payday Lending Rule Could Block Consumers’ Access to Small Dollar Loans

We here at CCS understand, perhaps better than most, the important role credit plays in the economy.  Consumer borrowing fuels economic growth. Credit, when used responsibly, allows consumers to spend money on goods and services, which in turn allows businesses to grow and expand, creating jobs and increasing income. So it is good news that consumer borrowing grew at a record pace in August, as reported by ACA International:

“The non-revolving credit increase was the highest since September 2015, Bloomberg reports. Economists estimated total consumer borrowing would increase $16.5 billion in August, according to the article. ‘Steady hiring and income growth may be making Americans more willing to borrow, helping to sustain consumer spending and the economic expansion,’ it states.”

The CFPB released the Proposed Rule in June, which could essentially shut down the small dollar lending market, forcing businesses to close and denying access to credit for millions of Americans who have nowhere else to turn.

At issue here are two critical points:

  • The CFPB has a predetermined viewpoint on the small dollar lending market (it is “harmful” to consumers) from which it will not be swayed by actual evidence.
  • As a result of this attitude, the CFPB approached the Small Business Regulatory Enforcement Fairness Act panel process in a purely perfunctory way. This absence of a good-faith effort to obtain meaningful feedback from small business compromises the lawfulness of any Final Rule.

It is heartening to note that the CFPB has received an unprecedented number of comments on this proposed rule from both small businesses and borrowers. We sincerely hope they will conduct serious additional research before releasing their Final Rule, especially since the Federal Appeals Court found the CFPB to be unconstitutionally structured.

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