The Consumer Financial Protection Bureau (CFPB) has proposed a rule that will impose several terms on payday loan lenders in June of last year. The purpose of the rule proposal is to prevent people from getting trapped in payday loan debt cycle. The rule requires the lenders to follow a set of strict rules in assessing the borrowers’ abilities to repay the loan. The problem with the rule is that it will make it very difficult for the payday loan to get approved for desperate people who are in need of the money to save them in emergency circumstances.
The CFPB was established under the Dodd-Frank Act. President Trump has vowed to repeal Dodd-Frank several times from the time during his campaign up until now. There is not yet any confirmation but it is likely that President Trump will attempt to remove all the regulations that CFPB have proposed. This can only happen if it gains the approval from the congress houses to repeal CFPB and the republicans are in charged of both houses.
Some people have speculated that President Trump will take over the place of the CFPB director called Richard Corday, originally, the director can only be fired if he did not conduct his duties properly. Despite that, the court later ruled that the president has the authority to fire the director of the CFPB for any reason. Corday’s term as the director of CFPB will come to an end in 2018. One way to prevent the rule from being implemented is that it may not be finalized. If he steps down, a nominee chosen by President Trump will take his place. The nominee will not give the finalization on the rule so that it cannot be implemented. It is up to President Trump to replace him sooner if he wants.
The congressional republicans can repeal the rule imposed on payday loan lenders through the Congressional Review Act if Richard Corday continues to be the director. In this way, the House and Senate can vote against each other. If most of the votes fall on the Senate, it will be able to prevent the payday loans regulation from being implemented. Repealing the proposed regulations will be advantageous not only to payday loan lenders but also on short term loans and bad credit loans.
It can also put an end to the small dollar loans that are typically offered by credit unions and community banks. The reason is that the CFPB requires complicated underwriting requirement on the small dollar loans. President Trump did not put the CFPB agency on his priority list but many experts have speculated that the agency will come to his attention within a short period of time.