Congress Must Reign in Another Obama-Era Abuse at CFPB

During the Obama administration, the

(CFPB) was allowed to run amuck, publishing onerous rules based upon value judgments instead of actual problems.

One example is the CFPB’s Small-Dollar Loan Rule, which will lessen Americans’ access to short-term, small-dollar loans. The Obama-era Rule is opposed by more than 1 million consumers that spoke out during the rules’ comment period, as well as the United States Hispanic Chamber of Commerce and the U.S. Small Business Administration. Yet, without explicit congressional action, the Small-Dollar Loan Rule will become law of the land.

The Small-Dollar Rule is the last vestige of the Obama Administrations tyrannical CFPB, one whose philosophy was to push the envelope “aggressively” with the assumption that government bureaucrats were the “good guys and the financial-service industry was the bad guys.” The CFPB is changing. Acting CFBP Director Mick Mulvaney said as he corrected course in an op-ed in The Wall Street Journal last month:

It is not appropriate for any government entity to “push the envelope” when it comes into conflict with our citizens. We have the power to do damage to people that could linger for years and cost them their jobs, their savings and their homes. If the CFPB loses a court case because we “pushed too hard,” we simply move on to the next matter. But where do those we charged go to get their time, their money and their good names back? If a company closes its doors under the weight of a multiyear Civil Investigative Demand, we still have jobs at CFPB. But what about the workers who are laid off as a result?

Mulvaney raises legitimate questions – ones that weren’t even on the radar during the Obama administration. And while that is great moving forward, to correct prior abuses, Congress needs to step in.

According to Mulvaney’s WSJ op-ed, only two percent of the CFPB’s complaints are related to payday lending. So it’s clear that the Small-Dollar Loan Rule didn’t stem from reports of abuses.

Instead, it stems from a belief among Washington bureaucrats that they have to “save” consumers from themselves. The average salary at the CFPB is $118,000, and 60 percent of CFPB employees make more than $100,000 per year. The CFPD don’t understand how low-income people are currently underserved by the traditional banking sector. And they don’t understand what it is like to run into an emergency that the traditional banking sector won’t help with.

In one survey, 75 percent of small-dollar loan recipients have no other option available to them. Placing high barriers on small-dollar lenders will only reduce the availability of credit to these people even further. That’s why groups like the U.S. Hispanic Chamber of Commerce (USHCC) took an outsized role in decrying the effects that the Small-Dollar Loan Rule will have.

Those effects will be grave. The CFPB estimates that two-thirds of small-dollar storefronts could close. While that is a staggering number, it may underestimate the impact. Charles River Associates said that it expects 82 percent of lenders to close.

Congress cannot let this devastating rule take effect. To stop the Small-Dollar Loan Rule, Congress must use the Congressional Review Act (CRA), just as it did to help Retirement Savers, and pass a joint resolution of disapproval. And quick. Congress only has 60 days to use the CRA – and it’s time is running out.

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