Keep Industry Insiders Out of the Payday Loan Regulatory Process
The Consumer Financial Protection Bureau (CFPB) has been an effective watchdog for consumers. However, since President TrumpDonald Trump Progressive Democratic lawmakers urge Biden to replace Powell as Fed chairman Close examination of COVID origins marks victory for US intelligence agencies Jan. 6 panel is seeking records of those involved in the rally ” Stop the Steal »MORE was elected, it increasingly protects financial predators rather than financial consumers.
The recent announcement by the CFPB of the overhaul of the payday loan rule is the latest example of this transformation. Better Markets recently explained in detail how the CFPB proposal would create a bar-less debtor prison for millions of Americans who were trapped in an endless cycle of payday loans they couldn’t repay.
Indeed, as the CFPB admitted, two-thirds of payday lender clients could not afford to repay the loan when they received it.
So, as the CFPB also admitted, if the “repayment capacity” test were not eliminated as it proposes, nine out of ten payday loan stores would close. In other words, the CFPB protects financial predators, not victimized consumers.
However, compounding all this are the recent explosive revelations that the CFPB process that led to this proposal was corrupted by the industry’s hidden influence and CFPB lies, as detailed in two recent exhibitions.
The articles allege that the payday lending industry covertly influenced the CFPB both through undisclosed meetings that the CFPB lied about and by covering up funding and industry influence on so-called academic research. independent, which was submitted to the CFPB as part of its proposal to empty the rule. .
First, Renae Merle of the Washington Post wrote a devastating review which revealed that Short-Term Loan Bar Association president Hilary Miller had selected a college professor in Georgia to write an article refuting a key criticism of the industry: that borrowers are harmed by repeated borrowing.
According to Merle, the payday loan industry funded the document and the specific data sets the professor analyzed.
Indeed, Miller, according to the article, even determined how borrowers’ credit scores were analyzed and directly weighed in on the conclusions the paper should draw to best reflect the outcome desired by the industry.
This supposedly independent academic paper was then used by the payday lending industry to get the CFPB to issue a proposal to weaken the payday lending rule, as described above.
Second, the New York Post’s Kevin Dugan wrote an article that alleged that the same Hilary Miller, on behalf of the payday loan industry, influenced another scholar, this time from Columbia University.
Dugan reported: “Since at least 2017, US regulators [at the CFPB] have relied on a single “objective” academic study to shape restrictions on short-term, high-interest loans, which critics say are likely to victimize cash-strapped borrowers.
“But the Ivy League professor behind this study… had a strong connection to a payday loan executive and advised other academics on how to influence policy makers.” Dugan added that the Columbia scholar had also “done previously undisclosed work at the behest of Hilary Miller.”
Although the academic claimed that his work was not influenced, it was nonetheless reported that “Miller hired and paid a third party to collect the data which [the academic’s] study was based on.
This scholar also “suggested how [a different] the industry-funded document… should frame its findings ”in a way that is“ particularly useful for the political audience you are trying to reach ”ie the CFPB.
Dugan also separately reported that the CFPB lied about its meetings with Miller and other industry officials before they offered to gut the rule. Dugan made Miller admit that he had met with CFPB officials after the CFPB denied it.
When Dugan confronted the CFPB with Miller’s direct contradiction, the CFPB asked not to talk about the debriefing. When Dugan declined, the CFPB stopped responding to all efforts to seek clarification or comment.
According to these reports, the CFPB met and relied on the payday loan industry before they gutted the rule and lied about it. Additionally, according to reports, the CFPB has relied on at least two industry-influenced studies masquerading as independent academic studies.
Given the difficulty of uncovering such a pernicious action, it is reasonable to wonder what else the CFPB is lying about.
Unfortunately, this is nothing new. The financial industry buying academics while hiding and disguising its influence behind seemingly independent academic work was brilliantly revealed in Charles Ferguson’s Oscar-winning documentary, “Interior work.”
The film shows how the financial industry funded and used academics and their supposedly independent research to influence the deregulation of the financial system in the years leading up to the 2008 financial crisis. History seems repeating itself.
Dennis Kelleher is the President and CEO of Better Markets, an organization that advocates for stronger financial regulation and supervision.