The Trump Treasury Department urged Tuesday that the Consumer Financial Protection Bureau (CFPB) rescind its important new rule regulating payday lending nationally, officially stating the government’s desire to see that the rule, currently in regulatory limbo, go away entirely.
The recommendation came as a part of a 222-page Treasury report on reforming the nonbank financial system, touching on “fintech” companies, payday lenders, debt collectors, student creditors, and much more. The Treasury called for greater latitude for non-bank financing and also new national rules on a range of non-bank lending.
“America is a leader in innovation. We must keep pace with business changes and encourage financial creativity to foster the nation’s vibrant financial services and engineering businesses,” Treasury Secretary Steven Mnuchin stated in a statement about the launch of the report.
The Treasury’s call to reverse the Obama-era payday lending principle is likely to prove particularly contentious.
The principle was finalized last year from the Obama-appointed CFPB Director Richard Cordray, shortly before he left office. It might have set nationwide requirements that payday stores and other small-dollar lenders determine that their clients have the ability to settle the short-term loans, which generally come at high cost.
The stated objective of the rule was to prevent borrowers from falling into “debt traps” of taking out a series of loans that are past-due. The organization, however, complained that the rule could eliminate the industry altogether.
Tuesday’s report argues that the rule would cut off consumer access to credit, and that states already have the power to regulate payday lending.
Already, the Trump administration has taken action against the law. Mick Mulvaney, President Trump’s acting director of the CFPB, started working shortly after taking office to update it. He has also sought to postpone it from going into effect. Generally, Mulvaney, that also serves as Trump’s budget manager and is a fiscal conservative, has moved to ease off of aggressive enforcement and lessen regulatory burdens.
Separately, the Trump administration has proceeded to loosen restrictions on banks offering payday-like products. Tuesday’s report indicated moving further with these reforms.
The report also creates a variety of different recommendations for reforms regarding facets of their financial regulatory system, such as greater regulatory lodging for new fintech products and services. Many of the recommendations will require congressional action.
It is the fourth and final in a series of reports requested by executive order by Trump to the topic of financial regulation.