How a Trump Presidency May Help the Cash Advance Online Industry
The cash advance industry has been under fire for several years. Critics charge that the rates are excessive and that borrowers can become trapped in a cycle of debt. In June 2016, the Consumer Financial Protection Bureau released its proposed rules to regulate lenders how offer payday, title, personal installment and cash advance loans. The rules would get started to all lenders offering short-term loans, including credit unions making loans in person, payday lenders operating storefronts and lenders offering cash advance online loans. However, there is some speculation that a Trump presidency may help the beleaguered online cash advance industry as well as traditional lenders offering similar products.
Why Trump’s Presidency Could Help the Cash Advance Online Industry
Throughout his campaign, Trump repeatedly denounced the CFPB and the legislation that authorized its creation, the Dodd-Frank Act. He has stated his belief that the Dodd-Frank is harmful to business growth as it is a “negative force” that “makes it impossible” for banks to function and for bankers to loan money for companies to create more jobs. On numerous occasions, Trump has vowed to “dismantle” or repeal the Dodd-Frank. Because changes to laws that have been enacted require the approval of Congress, Trump’s antipathy toward the Dodd-Frank Act might have been academic had the Democrats won control of either or both houses. However, since the Republicans will control Congress, Trump’s efforts to reform the Dodd-Frank and rein in the CFPB may meet with success.
Trump Has Proposed a Moratorium on Financial Regulations
During a speech made in August 2016, Trump stated that he would issue a moratorium on any new agency regulations, including new regulations from the CFPB. In an article appearing on AmericanBanker.com, analysts disagreed on how Trump might fulfill this goal. Some analysts stated that it might be too late to revoke or delay many of the regulations proposed under the Dodd-Frank. However, other analysts believed that Trump would have the tools to block or slow down new regulations. For example, he could leverage the Office of Management and Budget to bring pending regulations to a grinding halt. Legal scholars also believe that the White House Office of Information and Regulatory Affairs has the authority to review regulations and order a moratorium.
Republican Control of Congress May Help the Online Cash Advance Industry
Trump will not be alone in the fight to ensure that anyone who wants to obtain a cash advance online will have the opportunity to do so. Most Republicans in Congress have opposed the CFPB since its creation.
President Obama’s move to install Richard Cordray as the head of the CFPB as a recess appointment was viewed by many Republicans as a blatant abuse of executive power. A month earlier, Republicans in the Senate had filibustered Cordray’s nomination; by making a recess appointment, Obama was able to bypass the Senate and install his nominee. Although the Constitution is not explicit in defining the length of time required for Congress to be in recess before a president can make a recess appointment, in the last 20 years, no president has made such an appointment during recesses lasting less than 10 days. Obama made three other recess appointments during the same Senate break; the other three appointees were nominees to the National Labor Relations Board whose appointments had been blocked.
However, it was not just Obama’s “end run” appointment that concerned Republicans. As defined by the Dodd-Frank Act, the CFPB was organized with a single director who was not subject to presidential oversight or control and who could only be removed for cause. These protections were ruled unconstitutional in October 2016; the court ruled that consolidating power in a solitary individual who could not be removed by the president marked a dramatic departure from precedent. Although the CFPB is appealing the ruling, as matters currently stand, Trump could replace Cordray as soon as he is inaugurated. It is also possible that Cordray could choose to resign before or shortly after Trump takes office.
If Trump installed a like-minded director, the new director could simply refuse to finalize the rules on cash advance online loans and similar short-term, small-dollar credit products. If Cordray chose to remain at the CFPB, Republicans could opt to invoke the Congressional Review Act to disapprove the proposed regulations. Under the terms of the Congressional Review Act, Republicans would not need a filibuster-proof Senate as a simple majority would suffice.
Congress could also choose legislation to counter the effects of the CFPB. New legislation could replace, amend or revoke the rule. Another possibility that has widespread support is to restructure the CFPB, replacing the sole director with a bipartisan committee. The most popular model is to have a five-member committee; this would give the Republicans three committee members and the Democrats two committee members.
Trump and Republicans Likely to Face Opposition
Regardless of the possibilities, however, it should not be implied that Trump will be given a free hand when it comes to online cash advance loans or the CFPB. Sen. Elizabeth Warren, the driving force behind the creation of the CFPB, visited the agency’s headquarters the day after the election, according to Bloomberg. During her visit, Warren reportedly vowed to fight any attempts to alter the structure of the CFPB or to revise or delay the pending regulations for cash advance loans.
Trump will also have to deal with public opinion. Although many people who have never obtained an online cash advance oppose them, few of these people knew a great deal about the CFPB. However, the CFPB was thrust into the spotlight in September 2016 after the agency fined Wells Fargo $100 million. Apparently, bank employees covertly opened accounts for customers and funded the accounts by transferring money from the customers’ existing accounts — all without the customers’ knowledge or approval. In addition to the $100 million to be paid to the CFPB, Wells Fargo will be required to pay a total of $85 million to the City and County of Los Angeles and the Office of the Comptroller of the Currency as well as make full restitution to its victims.
News about the fines met with widespread public approval. Many consumers have not forgotten — or forgiven — the financial crisis of 2008 that took an extensive toll on retirement accounts, drove up the rate of home foreclosures and left many investors in dire financial condition. Since most people blame the big banks for the crisis, the news that the CFPB had taken a bite out of Wells Fargo earned the agency more than a few fans. Trump will need to balance the current level of support for the CFPB against the need to bring the agency under control and ensure the availability of cash advance loans for consumers who want and need them.
Should You Request an Online Cash Advance?
The choice of any credit product depends on your specific situation. Just like the decision to finance a car or use a credit card, the decision to obtain a cash advance online loan depends on how well the product suits your needs. If you would like to learn more about cash advance loans, you will find many helpful articles at the Personal Money Store.