Near the beginning of his administration, United States President Barack Obama launched the Consumer Financial Protection Bureau (CFPB). It is a federal consumer watchdog agency aimed at shielding consumers from unscrupulous players in the marketplace.
One of the initiatives that the CFPB has honed in on is reining in the payday loan industry. President Obama has repeatedly argued for heightened rules and regulations for the short-term, high-interest niche. And, as his days in the White House begin to wane, the president is trying to get the CFPB’s proposed 1,300-page rules on the payday loan industry signed before he leaves Washington.
Many thought that the CFPB wouldn’t be impacted and that the new rules for the payday loan industry would go into effect if former Secretary of State Hillary Clinton was victorious on Election Day.
Well, Donald Trump happened and his historic and upset victory threw a wrench into those plans.
The Wall Street Journal is now reporting that president-elect Trump could very well reverse the measures put into place by the CFPB, and could perhaps refuse to federally regulate payday loans. And this isn’t a conspiracy against Trump, but rather a conclusion made from the recent signals.
Since his Election Day win, stocks for payday loan companies and other businesses that offer high-cost loans have been surging in the U.S. and elsewhere around the world.
Moreover, CFPB director Richard Cordray’s term expires in July 2018. It is believed that Trump and the Republican-controlled Congress would attempt to replace him with a a bipartisan commission made up of five members and subject to the congressional appropriations process. Whether or not this happens remains to be seen, especially considering that the GOP doesn’t have a 60-vote filibuster proof mandate.
“Changing the CFPB’s policy-based statute, unlike Obamacare … is subject to a 60-vote filibuster in the Senate. That’s the main hurdle,” said Ed Mierzwinski, consumer program director of advocacy organization PIRG, in a statement.
“We expect [Republicans] to try and bypass that rule by attaching riders to either full appropriations bills next year or continuing resolutions. In fact, riders to eliminate independent funding, convert it to a commission, delay the poor credit loan and arbitration rules, and more, have been attached to the House and Senate appropriations bills for years, but stripped in negotiations with the White House.”
Another thing that should be noted is that Trump’s base in Middle America may not approve of dismantling the CFPB and refusing to adopt measures that would limit payday loan products.
For instance, in South Dakota, citizens voted overwhelmingly to cap interest rates on payday loans at 36 percent. It was reported that three-quarters of South Dakotans voted in favor of the measure. This has become a bipartisan issue as well as The Mount Rushmore State has become the fourth state since 2008 to cap rates on payday loans.
In any event, political pundits and analysts believe the Trump administration will refrain from abolishing the CFPB but rather curtail the CFPB’s supervision, enforcement and rulemaking capabilities. Either way, this would be seen as a positive for both financial institutions and alternative financial companies that are under the watchdog agency’s purview.