The Payday Lending Industry and CFPB Overreach

The payday lending industry is increasingly gaining support from some surprising sources in its campaign against CFPB overreach and the agency’s purported plans to regulate payday lending out of business. The Consumer Financial Protection Bureau, which was established in 2010 to protect consumers from predatory lending practices, was originally expected to limit payday lending severely or attempt to abolish it entirely. The CFPB was granted extraordinary regulatory powers that weren’t subject to the traditional checks and balances of free enterprise, legislative debate and judicial review.

Fortunately for people with bad credit and few financial resources, payday lending has lots of grassroots and political support, which consumer advocates and political opponents of the industry grossly underestimated but are gradually realizing due to the groundswell of support for short-term loans from disenfranchised U.S. citizens. Opposition to the CFPB and its unregulated practices have united payday lenders and the industry’s critics on the subject of regulatory overreach.

CFPB Overreach Ignites Opposition from Traditional Lenders and the Payday Lending Industry

A surprising aspect of the Bureau’s policies involves the CFPB’s determination to expand its powers beyond its legislative mandate. The agency has generated furious political conflict by attempting to regulate banks, traditional lenders, auto finance companies and dealership financing departments. Democrats, often credited with leading the fight that created the agency, have crossed the political aisle to nullify CFPB regulations that targeted automobile lenders and charged them with routine racial discrimination practices. The list of complaints against the CFPB includes:

  • The agency enjoys unprecedented regulatory powers that that aren’t limited by oversight and the traditional checks and balances of the legislative and judicial processes.
  • The bureau’s mandate bypasses constitutional safeguards and the states’ rights to regulate their own financial industries.
  • Funding for the agency isn’t subject to Congressional control through appropriations.
  • Courts are legally required to defer to the agency when interpreting federal consumer-related financial law.
  • The CFPB uses advanced data-collection methods that compromise consumer privacy and protected financial information.
  • The red tape that the bureau generates for mainstream businesses stifles consumer borrowing options.
  • Many small businesses that are the backbone of America’s economy face burdensome regulations that could effectively put them out of business.

The payday lending industry, one of the agency’s biggest targets for financial reform, obviously has strong reasons to oppose a government agency that was created to bypass constitutional processes and the due process of law, but strange bedfellows are joining payday lenders in opposition to the agency. Traditional banking industry stakeholders, auto dealers, political activists from the left and right, consumers and people who are concerned about excessive government regulation have joined the rising opposition. A poll conducted by news.heartland.org, which was financed by the U.S. Consumer Coalition, found that 55 percent of Americans oppose the CFPB or hold a negative opinion of the agency and compare its intrusive methods to those used by the National Security Agency against international terrorism.

Researcher Kel Kelly of the prestigious Ludwig von Mises Institute commented, “It could easily be argued that the CFPB is intruding into people’s lives in the name of helping them.” Additionally, dozens of polls find support for short-term loans as effective stopgap measures that empower people who have limited resources during financial emergencies. Consumers don’t even want CFPB protections and are sacrificing their privacy, freedom of choice and ability to weather short-term financial crises in the interests of what consumer groups decide is “good for them.”

The CFPB Generates Bipartisan Opposition from Both Democrats and Republicans

The growing opposition to CFPB overreach crosses party lines and philosophical attitudes such as conservative beliefs, middle-of-the-road leanings and liberal activism. A Washington Times article suggested that the CFPB in its mandate to protect consumers used “sloppy math” and engaged in “overregulation” that went outside its authority. Democrats joined Republicans on the House Financial Services Committee to overturn guidelines that the CFPB issued in 2013. Representative David Scott (D-Georgia) commented, “The CFPB has done the (automobile) dealers a massive injustice,” and he joined 12 other Democrats in a 47 to 10 vote to overturn the CFPB guidelines. Scott clarified his reasoning, “When you get into this area of accusing someone of racial discrimination, that is a serious indictment, and no industry deserves that kind of treatment…”

A financialservices.house.gov official statement from Financial Services Committee Chairman Jeb Hensarling (R-Texas) reads as follows: “The CFPB undoubtedly remains the single most powerful and least accountable Federal agency in all of Washington.” Americans are gradually losing the rights that are implicitly granted by the rule of law and their independence to choose with whom they do business.

Value Judgments from Advocacy Groups Target Payday Lenders Unfairly

The evidence clearly shows that every aspect of business and finance is subject to abuses such as the traditional lending practices of banks that resulted in the mortgage meltdown of 2008, regular Wall Street violations of public trust, predatory automobile lending and huge credit card debts that have become so common that they’re accepted as “normal.” Rational arguments about free enterprise, states’ rights to regulate their industries and constitutional safeguards can fall victim to advocacy frenzy when a group of advocates makes subjective value judgments and tries to decide what’s “good” for citizens instead of letting the market forces of supply and demand and freedom of choice determine any industry’s fate. If you want to read more about the growing opposition to the CFPB and its unilateral policies and lack of accountability that could affect every citizen’s rights, visit us at http://personalmoneystore.com/.

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