A bipartisan group of congressional representatives introduced a resolution to overturn the Consumer Financial Protection Bureau’s (“CFPB”) recently adopted “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule. The rule limits certain “payday” loans by requiring lenders to test a borrower’s ability to repay before providing a loan that would obligate the borrower to repay all or most of the debt at once, among other requirements.
The bill is sponsored by Representative Dennis Ross (R-FL) and co-sponsored by Representatives Alcee Hastings (D-FL), Tom Graves (R-GA), Henry Cueller (D-TX), Steve Stivers (R-OH) and Collin Peterson (D-MN). The resolution attempts to stop the rule using the same Congressional Review Act authority (recently used to block the implementation of the CFPB’s mandatory arbitration rule, see previous coverage). Under the Congressional Review Act, if the relevant committee in either chamber of Congress submits a joint resolution disapproving of an agency rule, then the rule can be overturned by a simple majority vote in Congress within 60 legislative days of finalization.
Representative Ross said that the rule will detrimentally impact citizens who rely on small-dollar lending “to make ends meet” and claimed that the CFPB usurped state authority by adopting the rule:
“I and my colleagues in Congress cannot stand by while an unaccountable federal agency deprives our constituents of a lifeline in times of need, all while usurping state authority. Today, we are taking bipartisan action to stop this harmful bureaucratic overreach dead in its tracks.”
Lofchie Comment: The CFPB’s payday rules are of the type that sound good in theory, but may injure borrowers that the rules were meant to protect. For example, while it sounds perfectly reasonable to say that the interest rate on payday loans is too high, it is necessary for lenders to take into account the costs of making very small loans and the high potential for loss. Given these costs, a low interest rate likely makes the business unprofitable. It is reasonable to ask, therefore, whether the intent of the CFPB rule was to bring down the rate of interest on CFPB lending (which is likely to fail) or to shut down payday lending altogether (a goal unlikely to be appreciated by borrowers).