President Trump loves to revisit – as often as possible – his electoral victory over Hillary Clinton. One of the states where Trump’s win was especially pronounced was North Dakota, where he defeated Clinton 63 to 27 percent. The state is, in many ways, the epitome of Trump country: More rural than most, with a strong agricultural sector and a solid voting bloc of religious conservatives.
On the same night North Dakotans helped propel Trump to the White House, they also delivered an even more emphatic verdict. By an overwhelming 3-to-1 margin, North Dakotans voted to sharply regulate the payday loan industry and cap the interest lenders can charge consumers. The conclusion was clear: Even in deep red Trump country, voters don’t want payday lenders to trap borrowers onto a treadmill of debt, getting into a vicious cycle that seems to never end for most consumers.
That memo doesn’t seem to have reached Mick Mulvaney, who President Trump tapped late last year to run the Consumer Financial Protection Bureau (CFPB). Mulvaney is already a controversial figure. He’s a political hack closely tied to the White House, running an agency Congress created to be independent. From day one, he has been clear the main purpose of the CFPB would be protecting industry from regulations, rather than protecting consumers from corrupt corporations and predatory lenders.
Yesterday, Mulvaney did quite possibly the most outrageous and corrupt thing he’s done since taking the helm at the CFPB: He sought to gut the pro-consumer payday lending rule the agency adopted last year on the very day that it was going into effect. At the exact moment the agency was finally acting to protect consumers from the abuses of payday lenders, the CFPB said it would revisit the rule, setting the stage to kill a commonsense measure that even red state voters have spoken loud and clear about.
There’s nothing radical about the payday lending rule that went into effect yesterday: The CFPB simply said that, if a lender is going to loan a consumer money, they need to determine that the consumer can actually pay it back. There was a time in America when that would have been called common sense. But in an Administration with a Wall Street banker in charge of the Treasury Department and one of the biggest recipients of financial industry campaign cash at the helm of the CFPB, it’s called bad business. That’s because payday lenders get rich by charging outrageous interest rates and locking consumers into an endless cycle of debt where a loan of a few hundred dollars can take years – and thousands – to pay back.
From day one, this White House has put Wall Street in the driver’s seat, throwing consumers under the bus by, among other things, leading the charge (and casting the deciding vote) to kill the CFPB’s rule allowing customers to take their banks to court. Now, Mulvaney is about to back the bus up and run over Trump’s own voters a second time, ensuring one of the most corrupt and unpopular industries in America has free rein to charge triple-digit interest rates to Americans who are already struggling to make ends meet.
To be clear, these loan sharks aren’t the last-ditch savior for struggling, working class Americans that their lobbyists want you to believe they are. In North Carolina, for example – where payday lending was outlawed – studies have shown that consumers found better, more reasonable lending options when they needed them.
When payday lenders are reigned in, consumers win: One recent report found that Americans spent $89 billion in just one year on fees and interest associated with payday loans. The average household without a traditional bank account spent $2400 – ten percent of its entire household income – on check cashing and payday loan fees. By putting reasonable limits on how these lenders behave – like the CFPB’s original rule and the voters of North Dakota wisely did – consumers are protected from the worst tactics of predatory lenders.
Instead, Mulvaney wants to ensure those same lenders are free to loan cash, at exorbitant interest rates, to people – whether they can pay the loan back, or not. It is a move eerily reminiscent of the freewheeling, no regulation days leading up the 2008 financial crisis.
The people of North Dakota spoke loud and clear on election night, and now the rest of us need to speak up, too. Mulvaney hasn’t pulled the trigger on officially killing the payday lending rule yet, so there’s still time to fight back and demand that he scrap his plan to sell out consumers. Look him up on Twitter - @CFPBDirector – and remind him who he’s supposed to really be looking out for.
Photo by DonkeyHotey, via Flickr