House Bid to Ax Payday Rule Kicks Off With Bipartisan Support

By Jeff Bater

A House resolution to repeal the Consumer Financial Protection Bureau’s small-dollar lending rule was introduced Dec.1 by a bipartisan group of lawmakers.

The legislation uses the Congressional Review Act to halt the bureau’s regulatory crackdown on payday lenders and prevent it from issuing similar regulations in the future.

The resolution is sponsored by Rep. Dennis Ross (R-Fla.) and cosponsored by Reps. Alcee Hastings (D-Fla.), Tom Graves (R-Ga.), Henry Cuellar (D-Texas), Steve Stivers (R-Ohio) and Collin Peterson (D-Minn.).

The CFPB cracked down on payday lenders in October. The final rule, five years in the making, requires payday lenders to determine upfront whether consumers have the ability to repay their loans. The rule also places limits on repeat loans. It goes into effect Jan. 16 — but most sections carry a compliance date of Aug. 19, 2019.

The House resolution comes a month after President Donald Trump signed a measure approved by both houses of Congress that repealed a CFPB rule that prevents financial firms from steering customer disputes into arbitration.

A spokesman for Ross said there is strong support in the Senate for the new, payday rule resolution.

Difficult Path

But Charles Gabriel, an analyst at Capital Alpha Partners, predicted Senate passage is likely to be difficult. “No more than a one-in-three prospect,” he told Bloomberg Law.

Margins are slim in the Senate, where Republicans hold 52 seats. Senate Republicans circulated a resolution in early 2017 to roll back the CFPB’s prepaid card rule, but never brought that measure to a floor vote.

House lawmakers think the payday-rule resolution will succeed. In a statement, Ross said more than 1.2 million people in his state each year rely on Florida’s “carefully regulated small-dollar lending industry to make ends meet.”

“The CFPB’s small dollar lending rule isn’t reasonable regulation — it’s a de facto ban on what these Floridians need,” Ross added.

Hastings said 5.5 percent of Americans have used short-term loans in the past. “I myself used a short-term loan to start my law practice, because that was the only loan available to me at the time,” he added.

Hastings was among the top Democratic recipients of campaign contributions from the payday lending industry during the 2016 campaign, according to Open Secrets. Most industry campaign cash goes to Republicans, but Cuellar, a Texas Democrat, was also a top recipient.

Daniel Press, a policy analyst at the Competitive Enterprise Institute, praised House lawmakers for showing leadership. “If implemented, the rule would leave millions of Americans in a real bind at exactly the time they need a fast loan to cover an urgent expense,” he said in a statement.

The Consumer Financial Services Association of America, an industry group for the short-term lenders, is currently exploring its legal options with regard to the CFPB’s small-dollar rule. “We anticipate having more to say in the coming weeks,” the group said in an email.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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