Courtesy of Choploan.com
Thousands of payday lenders all over the US are happily rejoicing since recent decisions made by the Trump’s government have made their lives that much easier. Businesses that basically destroy families financially have lots of benefits provided by the government and the Republican Congress seems to be quite happy about it.
A recent joint resolutions were recently introduced in the senate. The main generator of the idea is Lindsey Graham who represents South Carolina. The new legislation will not only allow lenders to work more actively in the field, but strip them off various burdens that affect short-term credits. Limitations and restrictions were imposed previously be the CFPB, but their rules are now undone. In addition, they cannot try to create something similar in the nearest future. This makes all people more vulnerable to predatory actions of small payday lenders.
One of the rules that protect people from lenders enforces the necessity to check whether a person can actually pay for their loans. This regulation was supposed to be shipped in January, but was held back by the head of CFPB Mick Mulvaney who is also one of Trump’s appointees.
The law is under reconsideration process, but it does not seem that the government wants to make it happen. In fact, many decisions from CFPB are quite predatory and allow many lenders to act even more aggressively which is not something that you would expect from a caring government. The previous government under Barack Obama was not so kind to the payday loans industry.
It is not only about a single bureaucrat and a senator, but about a whole bunch of people in the government who seem to forget about their duties when it comes to protecting law abiding citizens from predatory businesses. In fact, over 40 senators from the Democratic party decided to write a special letter of concern to the director of CFPB. They urged him to continue working in the direction of bettering the industry and creating stricter regulations that businesses would have to abide.
The problem is that legislators do not have to fight for this rule to happen. A simple majority will tip the scales in any direction. This is something that senate is struggling with – to make things actually happen. The new resolution from the South Carolina senator. It is important to note that senator who decided to abstain from signing the letter will be re-elected in states that were won by the current president. This seems like a very sad notion.
There are many payday lenders who actively participate in lobbying for their industry. Their efforts do seem to pay-off as Republicans consistently try to attack regulations that the CFPB are trying to implement in order to restrain the industry that grows rapidly and throws more and more Americans in the vortex of financial problems. The Open Secrets data reveals that the amount of donations of lobbyists spiked massively after the passage of the infamous Dodd-Frank Act about 8 years ago.
Over $9 million was transferred to various members of congress from payday lenders with $7 million of that amount going in pockets of republicans.
The CFPB was supposed to focus on creating a healthier environment in the industry and helping both consumers and lenders to level the playing field and make the whole market fairer. This was the main priority of the agency after Mulvaney occupied the director’s seat. However, nothing was done to actually protect people. In fact, the results of his activities were quite the opposite as businesses were allowed to increase the pressure on consumers.
There were several positive steps made by Mulvaney, but the way he freed several huge companies from being investigated is baffling. Just a couple of days before releasing his memo where he promised to work hard to protect people, he decided to drop a lawsuit that was made against several companies that charged over 1000% for their loans. You didn’t misread the number. One thousand percent.
While Mulvaney himself rejects all claims that he is working to protect interests of predatory businesses that sponsor his campaigns, his actions usually speak louder than his words and he is a true protector of lenders.
The industry is a huge pie with lenders generating crazy profits. The industry managed to pile up $9 billion in profits during the last year. This number may grow even bigger soon enough with 12 million Americans using payday loans on a regular basis.
While many payday lenders try to reason that their business is just something that fills the void left by banks and bigger financial organizations. Consumers do know that their work is harming the market and the society. The vast majority of borrowers are unable to pay off their bills and go deeper in the debt hole. For some reason, Americans cannot just default and try to take more money to repay the bill and fall in yet another hole. 4 out of 5 loans are renewed.
The CFPB was created to make sure that the market is safe for consumers and that all act according to a set of rules that minimizes potential damage. Nonetheless, the Trump’s administration seems to forget about it.