CFPB Ignores Compliant Data Targeting Payday Lenders

by Alex Johnson 0

Looking for a strongly worded opinion piece on the CFPB’s proposed payday lending rules? Dennis Shaul, in an article on American Banker, has you covered.

The CFPB has relied on advocacy groups while casting aside research showing that short-term loans enhance the financial welfare of consumers who use them. In addition, recently-released documents showed that small business owners providing feedback to the CFPB through the advisory panel process “stated that the proposals under consideration by the bureau were unnecessary and onerous” and that they “would be unable to continue operating” if the CFPB proposals were enacted. But absent changes in the bureau’s approach, those concerns have appeared to fall on deaf ears.

Mr. Shaul makes an interesting point regarding the attention paid by the CFPB to payday lending relative to the volume of consumer compliants leveled against payday lenders.

When the Consumer Financial Protection Bureau started releasing monthly consumer complaint data last year, Director Richard Cordray hailed the move, saying that “[c]onsumer complaints are the CFPB’s compass and play a central role in everything we do. They help us identify and prioritize problems for potential action.” Given these comments, it is increasingly difficult to understand the CFPB’s justification for the rulemaking process for payday lending currently underway. The bureau is investing considerable time, energy and resources on payday lending in spite of the fact that consumer complaints about these short-term loans are remarkably low — lower than almost every other financial services product.

Specifically, the 12,193 complaints regarding payday loans make up just 1.5% of all complaints received by the CFPB. These are eclipsed by the 205,915 complaints about mortgages, 83,255 complaints about credit cards, 77,290 complaints about bank services and hundreds of thousands of complaints about other products. True, these industries have been targeted in formal rulemakings and enforcement actions, such as the “Qualified Mortgage” rule and the CFPB’s recent moves against companies engaged in illegal practices. But in light of the relatively fewer payday loan-related complaints, the sweeping nature of the bureau’s payday loan proposal unveiled in March runs counter to its argument that it uses the complaints as a guide.

Overview by Alex Johnson, Director, Credit Advisory Service at Mercator Advisory Group

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