Under Trump, Mulvaney, It's Payday For Payday Lenders

One of the triumphs of the Obama era’s rather weak history of enforcement of corporate malfeasance was the crackdown on the abuses of payday lenders. Studies had shown that, because of usurious rates of up to 400%, the majority of people who used payday lenders were required to take out a new loan in order to pay off the old one, creating a vicious and permanent cycle of indebtedness.

Because of the crackdown by individual states as well as the Consumer Financial Protection Bureau (CFPB) which resulted in enforcement actions against more than 20 firms, the payday lending industry’s revenue dropped from $9.2 billion in 2012 to just $5.3 billion in 2017.  And further restrictions on short term lenders were scheduled to kick in this year that actually forced these companies to assess whether the borrowers were actually in any financial condition to potentially repay the loan they were being offered. That was until Mick Mulvaney replaced Richard Cordray as head of the CFPB.

Mulvaney has now delayed the implementation of that rule, claiming that it was not a priority for the agency. In addition, he has dropped a suit against internet lenders who charge interest rates as high as 900%. Mulvaney also shut down a four-year long investigation into a company called World Acceptance Corporation, a consistent donor to Mulvaney when he was in Congress.

With the clear indication that federal oversight will not be an issue, payday lenders are getting back to their old tricks where they are still allowed to work with impunity.  In Indiana, the House voted to allow payday lenders to provide 3 month to one year loans of up to $1500 at rates of up to 222%. Current Indiana law considers interest rates over 72% as felony loansharking, but payday lenders are exempt from that rule. It is the ultimate protection racket turned on its head with the government running the racket. You can get a loan at a cheaper rate from an illegal loan shark than you can from a legal payday lender.

Finally, the payday lenders also know how to pay back their benefactors. Besides the millions in campaign contributions that have primarily gone to Republicans since the creation of the CFPB, the industry is now planning to host a four day conference at the Trump Doral course in April, further lining Trump’s pocket and enabling his violations of the Emoluments Clause. It’s not only payday for the lenders but also time to payback those who allow them to continue their legalized usury.