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Payday Lenders Fight New Restrictions


Payday lenders lost their fight trying to block new federal rules that will curb short-term loans that many critics say trap vulnerable people in a vicious cycle of debt.

Now that these restrictions are set to go into effect next year, payday lenders are moving their fight to the courts. It also looks like lenders have found a powerful new ally: the Consumer Financial Protection Bureau, the very entity responsible for the rules the payday loan industry is trying to overturn.

Mick Mulvaney, the Consumer Financial Protection Bureau’s acting director, took the side of two industry trade groups suing the agency, according to a joint motion filed in Austin, Texas. The bureau asked a judge to delay the new rules until the lawsuit can be resolved, which might take years.

However, by the time the lawsuit wraps up the whole issue could be moot. This is because Mulvaney has vocalized his intention for the bureau to reconsider and maybe repeal the rules. To achieve this, the Consumer Financial Protection Bureau must follow a formal administrative process, which the agency claims to have plans to start by February.

Consumer advocate groups favoring the new rules have complained that the court filing appears to be a strategy intended to delay the restrictions long enough for the bureau’s new leadership to eliminate them before they can go into effect.

Linda Jun, a senior policy lawyer for Americans for Financial Reform had the following to say, “In order to reopen a rule, you have to go through the same process you did to create it. You have to give notice and let the public say their piece. You don’t get to say, ‘I just don’t like it, so I’m going to do a legal end run around it.’”

One of the plaintiffs in the case and The Community Financial Services Association of America say they are happy that the Consumer Financial Protection Bureau is planning to reconsider what they call “arbitrary and capricious” rules. According to the group’s chief executive, Dennis Shaul, “It makes no sense to force companies to comply or prepare to comply with a rule that may never take effect.”

Since becoming temporary commander of the Consumer Financial Protection Bureau just one month after the short-term-loan rules became final, Mulvaney, has dropped several of the agency’s lawsuits against payday lenders and has also taken a much softer stance toward regulating the industry than his predecessor.

Each year, the payday loan industry makes close to nine billion dollars in loan fees off of the 12 million Americans who are forced to take out these loans to pay their bills and other debts. Payday lenders target those who are financially vulnerable and without access to traditional bank loans. Often, people only need proof of employment and a bank account to qualify for these high interest loans.

At Atlas Consumer Law, we are committed to helping our clients fight back against unfair debt collection practices. If you are being hounded by creditors for your payday loan debt, we can protect your rights and stop their harassment. Contact our team of Chicago consumer law attorneys to schedule your free case evaluation today!