At a Senate Banking Committee hearing today, U.S. Sen. Mark Warner (D-VA) pressed the Director of the Office of Management and Budget (OMB) Mick Mulvaney, who serves on a temporary basis as the head of the Consumer Financial Protection Bureau (CFPB), not to undo or weaken the CFPB’s payday lending rule.
The rule would require lenders to determine upfront whether or not a borrower can afford to pay back a loan without having to take out another loan. The rule represents an important step in reining in predatory business practices by payday lenders nationwide that are designed to exploit the financial hardships facing millions of hardworking families.
“The payday lending rule’s purpose is pretty simple: lenders should figure out whether a borrower is able to pay back a loan so that consumers don’t get caught up in a revolving cycle of debt,”said Sen. Warner during his questioning of Director Mulvaney.
Congress created the CFPB to protect Americans from unfair, deceptive and abusive lending practices. Predatory lenders often target hardworking borrowers who find themselves in need of quick cash—often for things like necessary car repairs or medical emergencies—by charging them excessive interest rates and hidden fees that trap them in long-term cycles of debt. Nearly 12 million Americans use payday loans each year, incurring more than $9 billion annually in fees. The CFPB developed the payday lending rule over the course of five years and reviewed more than 1 million public comments.
Last month, Sen. Warner also wrote to Director Mulvaney urging him not to repeal the payday lending rule.
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