Tuesday, February 12, 2019
Kathleen Kraninger, the new director of the CFPB, suggested eliminating payday lending restrictions, choosing instead to side with payday lenders, who called the practices unfair and ill-conceived. Kraninger citing "insufficient evidence and legal support" for the protections as her rationale.
Opponents noted that Kraninger, whose former background is with the Department of Homeland Security, has scant experience in consumer protection and may be susceptible to special interests and initiatives designed to soften the structure and enforcement of the CFPB's regulatory framework.
Despite her mixed reception on Capitol Hill, Kraninger earned praise for striking down former CFPB director Mick Mulvaney's proposed name change of the bureau, from CFPB to the Bureau of Consumer Financial Protection (BCFP). Critics pointed out that the name change would have been costly for the agency and its stakeholders.
In a Dec. 3, 2018, post in The Hill, titled "Exclusive: consumer bureau name change could cost firms $300 million," journalist Sylvan Lane reported that banks, lenders and other agencies subject to CFPB oversight "would be required to spend millions of dollars if the agency goes through with a rebranding proposal from acting director Mick Mulvaney."
Kraninger promptly dismissed Mulvaney's name change proposal, stating, "I care much more about what we do than what we are called," in an email to CFPB employees. She officially terminated related efforts to rebrand existing products and services. To further underscore her point, she tweeted a photo of two side-by-side coffee mugs bearing the CFPB and BCFP brands, stating, "Both can do the job. It's what we put inside that matters."
Kraninger's strong position on the proposed name change did not deter speculation about the CFPB's future, particularly with regard to stopping payday lenders from transacting with consumers who clearly have no way to repay their debts. In a Feb. 6, 2019, post in Consumer Reports, Toby Stanger wrote that payday loans can impose interest rates of up to 400 percent and urged consumers to seek alternative funding sources.
"Regardless of whether and how the Payday Lending Rule changes, if you need money, there are other options," Stanger wrote. Options include credit counseling, volunteer income tax assistance, lending circles and installment loans. Also, credit card cash advances can have more favorable terms than payday loans and offer open-ended repayment periods, which prevent borrowers from repeatedly borrowing to repay loans on time and getting further into debt.
Stanger additionally noted that a payday loan customer who borrows $500 would typically owe about $575 two weeks later. The pressure to repay loans on time increases debt and is a hard cycle to break, she stated. For example, CFPB data found that approximately 50 percent of all payday loans involve approximately 10 consecutive loans.
Critics say opportunistic lending practices unfairly target vulnerable consumers. Stanger and other consumer advocates question if CFPB protections will continue to thwart bad business practices or if the entity will become a consumer financial protection bureau in name only.
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