CFPB’s Kraninger faces fury from Democrats over pay rule
WASHINGTON – Senate Democrats have blasted Bureau of Consumer Financial Protection director Kathy Kraninger for finalizing a rule during the coronavirus pandemic that eliminates underwriting requirements for payday lenders.
In a hearing before the Senate Banking Committee on Wednesday, Democrats on the panel focused on the payday rule by criticizing the agency’s record on consumer protection during the pandemic crisis.
“As far as the changes you’ve made to the payday loan rules… it’s outrageous that in the midst of this pandemic, with so many people struggling to make ends meet, you’ve provided this big day of payroll to payday lenders at the expense of the consumer, ”said Sen. Chris Van Hollen, D-Md. “It’s bad all the time, but especially glaring at a time when so many families are struggling to make ends meet.”
Earlier this month, the CFPB implemented the rule long sought by Trump administration appointees that waives repayment capacity requirements for low-value lenders. The strict underwriting standards were part of a previous rule released in 2017 under the leadership of then CFPB director Richard Cordray, appointed by Obama.
Democrats looked at the CFPB’s process to finalize the rule under Kraninger’s leadership, after reporting by The New York Times that the agency watered down the research and downplayed the findings about harm to consumers if the underwriting requirements were eliminated.
“Is it appropriate that the CFPB ignores research to repeal this rule?” said Sen. Sherrod Brown of Ohio, the committee’s top Democrat. “The fact that you proceeded to finalize a rule, director, despite a clearly corrupted process, which you have read, raises questions as to whether you are obeying the law.”
Kraninger defended the settlement approval process, saying “the complete dossier is available in the regulatory process, both the 2017 process and the updated process.”
Republicans have argued that the new payday loan rule will improve consumers’ access to credit.
“The availability of short-term, low-value credit is essential for millions of Americans,” Crapo said. “Updating this rule is an important step in ensuring the availability of credit which is essential for so many consumers who are struggling to access or qualify for other options.”
Kraninger said the previous wage regulation would have reduced access to credit by 70% and the new rule was intended to promote competition in the industry and allow banks and credit unions to offer loan products. low amount.
“Promoting competition and enabling consumers to understand the products available to them is a big part of where we are today,” Kraninger said.
But Senator Catherine Cortez Masto, D-Nev., Said it was hypocritical for the CFPB to cancel the repayment capacity requirements in the payday loan rule when the agency typically assesses a company’s capacity. to pay a fine when settling enforcement issues with a firm.
Cortez Masto cited a suspended CFPB sanction against a Florida company that allegedly charged customers millions of dollars in illegal fees. The company ultimately paid only a small portion of the fees as a penalty.
Kraninger told Cortez Masto that the CFPB generally estimates the effort it would take for the agency to recover funds from a company that does not have the funds to pay, when determining settlement amounts.
“Do you see the hypocrisy here?” Cortez Masto said. “That you have bad players in payday loans. That you determine if they have the capacity to pay their judgments and then bail them out using that civilian money fund. But then in fact, the borrower of the payday lender, you are not looking at the ability to repay. And there are predatory lenders out there.
Senator Elizabeth Warren, D-Mass., Disputed a memo the CFPB sent to mortgage managers saying the agency would not penalize them as long as they acted in “good faith.” Warren said a firmer stance was needed in light of consumer complaints about agents filed with the CFPB which increased at the start of the pandemic.
Kraninger defended the CFPB’s response to mortgage complaints, saying the number of complaints in this area has declined since the start of the pandemic. She also underlined “the discretionary power enjoyed by all law enforcement entities in the cases they undertake and where they spend their energy”.
But Warren described Kraninger’s directives as a “free jail release card” and called on her to resign.
“Your leadership has been a miserable failure,” said Warren. “Based on your actions in this pandemic, you should resign.”
Senator Jon Tester, D-Mont., Said Kraninger was not responding appropriately to questions from committee members.
“I’ll tell you, Director Kraninger is very, very good at not answering questions,” Tester said. “By the way, it’s not a good quality. … These auditions with Director Kraninger were a complete waste of time.