Payday Lending Faces Tough New Restrictions by Consumer Agency
The bureau has aggressively pursued new regulations and enforcement actions since Mr. Trump took office, even as other federal agencies loosened the reins on the industries they monitor.
The payday-lending industry is vast. There are now more payday loan stores in the United States than there are McDonald’s restaurants. The operators of those stores make around $46 billion a year in loans, collecting $7 billion in fees. Some 12 million people, many of whom lack other access to credit, take out the short-term loans each year, researchers estimate.
Lenders argue that the loans provide financial lifelines to those in desperate need of cash, and that the high fees and interest rates are justified by the failure of so many borrowers fail to repay the loans.
The new federal rules limit how often, and how much, customers can borrow. The restrictions, which have been under development for five years, are fiercely opposed by those in the industry, who say the measures will force many of the nation’s nearly 18,000 payday loan stores out of business.
“These protections bring needed reform to a market where far too often lenders have succeeded by setting up borrowers to fail,” Richard Cordray, the consumer bureau’s director, said during a call with reporters to discuss the rule.
Until now, payday lending has mainly been regulated by states, and 15 already have already made the loans effectively illegal. In more than 30 other states, though, the industry is thriving.
Industry officials said on Thursday that they would file lawsuits to block the rules from taking effect in 2019 as scheduled.