Policy

‘Lenny the Loan Shark’ Leads Opposition to Payday Rule Repeal

Democrats gearing up for one of the biggest fights of the spring

Protesters gather in front of the Consumer Financial Protection Bureau on Thursday. (Doug Sword/CQ Roll Call)

What do Mick Mulvaney, Sens. Lindsey Graham and Richard J. Durbin, Lenny the Loan Shark and progressive groups have in common?

They all appear to be prepping for what is likely to be one of the biggest political fights of the spring — the attempt to repeal the Consumer Financial Protection Bureau’s controversial payday lending rule using the Congressional Review Act.

The sidewalk outside the CFPB’s downtown headquarters was the venue for a Thursday press conference featuring a man in a shark suit, who identified himself as Lenny the Loan Shark. Lenny sarcastically thanked CFPB Acting Director Mulvaney for dropping enforcement actions and lawsuits against payday lenders, as well as Graham for introducing a resolution last week that would repeal the payday rule published last October.

“I want to thank our crony and Trump apparatchik Mick Mulvaney, who’s been controversially appointed acting head of the CFPB, for really helping us turn the CFPB upside down,” said Lenny, whose performance was the work of progressive groups, including Americans for Financial Reform and the Center for American Progress. The protests also touched on other Mulvaney actions related to payday lenders.

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The 1,690-page rule, which takes effect in mid-2019, would regulate payday and auto title lenders whose annual percentage rate of interest exceeds 36 percent. The bureau estimates there are some 16,000 payday storefronts in 35 states.

Opponents of the rule say it would lead to the demise of most payday lenders — a finding supported by a CFPB study — and that it would deny poor people with bad credit ratings an emergency source of funds that can help them fix a car needed to get to work or avoid reconnection charges by paying a cable bill on time.

A series of studies done when Democrat Richard Cordray headed the bureau found that the APR on a payday loan, typically required to be paid back within weeks and guaranteed by the borrower’s next paycheck, exceeded 300 percent and frequently led to repeat re-borrowings, or what consumer groups claim are “debt traps.” The rule would limit re-borrowing to pay off an existing debt and require lenders to judge a borrower’s ability to repay.

When the House version of the CRA repeal was introduced, co-sponsor Rep. Alcee L. Hastings said in a statement that the payday rule would “shutter much of the available small-dollar loan volume in the country, leaving many hardworking Americans with nowhere to turn during tough times.”

Despite the support of the Florida Democrat, only three of 36 House co-sponsors are from his party. It will be Republicans who will have to carry the resolution when it comes to the floor in both chambers. Graham’s version of the repeal has no co-sponsors.

Joe Valenti, director of consumer finance at the Center for American Progress, estimates that based on the timing set out in the Congressional Review Act, repeal votes must take place by mid-May.

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The reason why progressive groups will fight hard against the repeal is that once a CRA repeal becomes law, the agency can’t adopt a substantially similar rule in the future.

“So it’s taking any regulation on payday lending off the map not just for now or for this director, but for the foreseeable future,” Valenti said.

Rep. Donald S. Beyer Jr., who spoke at the Thursday press conference, thinks Republicans, particularly from rural districts or states, will have a hard time supporting the bill.

“I don’t know that this will roll through,” the Virginia Democrat said. “This is a lot more controversial” than the 15 CRA repeals passed last year.

“As we’ve seen, payday lending isn’t just [the] inner city represented by blue Democrats,” he said. “There’s a lot of it in rural America, and it’s hard for me to imagine that those Republicans who mostly represent rural America are going to be excited about throwing their constituents under the bus.”

On Tuesday, 41 Senate Democrats, led by Durbin and joined by independents Bernie Sanders of Vermont and Angus King of Maine, sent a letter to Mulvaney urging him to end efforts to undermine and repeal the payday lending rule.

Tellingly, the letter was sent to Mulvaney using his title as director of the Office of Management and Budget, and to Leandra English, “Acting Director of the CFPB.”

The directorship of the bureau was the subject of a late November lawsuit brought by English, who was appointed CFPB director by Cordray on his last day in office, after President Donald Trump named Mulvaney as the acting director. U.S. District Judge Timothy J. Kelly ruled in Mulvaney’s favor. The decision has been appealed.

Democrats continue to refer to English — listed on the CFPB website as deputy director — as the bureau’s acting director.

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