Trump is making it easier for payday lenders to prey on Americans hit by job losses
The administration is set to roll back yet another Obama-era regulation created to protect Americans.
The Trump administration will officially roll back an Obama-era regulation on predatory lenders next week — a move that will make it easier for lenders to prey on vulnerable, cash-strapped Americans facing the economic fallout from the COVID-19 pandemic.
The New York Times reported on Wednesday that the justification for the rollback — which “will no longer require lenders to assess whether customers can afford their fees before offering a loan” — was based on fudged data by a Donald Trump political appointee at the Consumer Financial Protection Bureau who manipulated data on payday lenders to make their practices look less predatory.
The manipulated data was detailed in a memo last year by a “career economist” who departed the agency last summer. The memo specifically described “several maneuvers by his agency’s political overseers that he considered legally risky and scientifically indefensible, including pressuring staff economists to water down their findings on payday loans and use statistical gimmicks to downplay the harm consumers would suffer if the payday restrictions were repealed.”
The Times obtained the memo from a current CFPB employee.
Payday lenders typically charge exorbitantly high interest rates and high fees on short-term loans. Those who seek out payday loans are often low-income Americans who do not have access to credit, and many times end up quickly incurring more fees and interest than the actual loan they took out — delving those borrowers even deeper into debt, according to a March 2014 review of payday lending practices by the CFPB.
Experts say that the COVID-19 pandemic is already ripe for payday lenders seeking to exploit the most vulnerable Americans, millions of whom are struggling to put food on the table amid job losses and furloughs.
“When people are afraid or desperate, they’re less effective at shopping carefully and weighing options,” Chris Peterson, a former top regulator at the CFPB, said in a recent interview. “There is a temptation to just find the first option that seems acceptable and jump on it.”
During his tenure, former President Barack Obama tried to protect Americans from these predatory lenders, issuing a rule that required the lenders to ensure borrowers could pay back loans before approving them.
But the Trump administration has been trying to roll back that rule since 2017 — an attempt initially led by former acting CFPB Director Mick Mulvaney, who later went on to be Trump’s chief of staff.
Mulvaney left the White House in March.
The Trump administration finally announced that it would be removing the Obama-era regulation on lenders on Feb. 6 — the early days of the COVID-19 pandemic.
That announcement gave 90 days for public comment before the rollback would go into effect. Those 90 days expire next week.
Published with permission of The American Independent Foundation.
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