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The Consumer Financial Protection Bureau will unveil debt collection rules in a few weeks, the agency’s director said yesterday, potentially unleashing a battle over the industry’s tactics and consumers’ rights, the Washington Post reported. The proposal, which would be the first update to the Federal Debt Collection Practices Act in more than 40 years, will address how often debt collectors can call someone and the industry’s use of emails or text messages, CFPB Director Kathy Kraninger said. The CFPB will “modernize the legal regime for debt collection,” Kraninger said in her first major speech since becoming the bureau’s director in December. The $11 billion industry has been anxiously awaiting the proposal, hopeful the Trump administration would set out clear rules, including allowing debt collectors to email and text consumers. Consumer advocates, meanwhile, have asked the CFPB to stop debt collectors from harassing consumers and collecting on “zombie” debts.

A federal judge delivered another victory to payday lenders by leaving in place a stay on the compliance date for the Consumer Financial Protection Bureau’s 2017 payday lending rule, American Banker reported. That rule, drafted under former CFPB Director Richard Cordray, had two key components: new underwriting requirements for high-cost, small-dollar lenders, and limits on how often a lender can attempt debiting payments from a borrower's bank account. The CFPB under Trump-appointed Director Kathleen Kraninger already proposed eliminating the underwriting portion. But in a surprising development, U.S. District Judge Lee Yeakel's ruling that a stay of the Aug. 19 deadline will remain in effect means the payment provision will continue to be delayed as well. Yeakel, who did not indicate when he would lift the stay, is presiding over an industry lawsuit in Texas seeking to kill the rule. Once the Trump administration took control of the CFPB, the bureau sided with the plaintiffs in the case and announced its intent to reopen the rule and propose changes. The judge issued the stay in November to give the agency time to formulate a proposal.

Lawmakers grilled Kathy Kraninger, director of the Consumer Financial Protection Bureau, Tuesday over the agency's decisions to overhaul the payday lending rule and to stop examining financial firms for compliance with the Military Lending Act, American Banker reported. In her first appearance before the Senate Banking Committee since being sworn in three months ago, the bureau head was also pressed about her failure to take action on student loan debt. At the hearing, Sen. Elizabeth Warren (D-Mass.) criticized the steep drop-off in enforcement actions since the GOP took control of the agency. Asked how many lawsuits the CFPB has filed against student lenders, Kraninger demurred, saying she didn't have "the specific answer to that question." “The public record seems to show zero,” Warren replied. “Not one single action.” In addition, several senators sharply criticized Kraninger over the CFPB’s decision to halt examinations of financial firms for compliance with the Military Lending Act. Kraninger has yet to resume the exams after taking over for Mulvaney, who halted them. The Obama administration had conducted supervisory exams for years, and long cited its authority not just under the Dodd-Frank Act, but also in regulating “unfair, deceptive or abusive acts or practices,” known as UDAAP. In January, Kraninger sided with Mulvaney and specifically asked Congress to give the CFPB "clear authority" to conduct supervisory exams for MLA compliance.

Consumer Financial Protection Bureau Director Kathleen L. Kraninger will testify today at a 10 a.m. EDT hearing before the Senate Banking Committee to provide the CFPB's semi-annual report. To view witness testimony and access a live webstream, please click here.

The Consumer Financial Protection Bureau held negotiations with a prominent payday loan executive before the US agency rolled back stiff regulations of the controversial industry that had been slated to take effect this year, the New York Post reported. Hilary Miller, president of the Short-Term Loan Bar Association, a trade group for lawyers representing payday lenders, confirmed that he represented individual lenders in discussions with the CFPB last year, in the months before the agency scrapped onerous rules proposed in 2017 that had been slated to go into effect this summer. The comment by Miller confirmed to The Post directly contradicts a statement made to the Washington Post earlier this week by Marisol Garibay, the CFPB’s acting chief communications officer. “The bureau did not discuss its proposal to rescind the rule with industry officials before making the announcement,” Garibay said, the newspaper reported on Monday. The CFPB, which regulates the lenders, has been under scrutiny from consumer advocates over perceived conflicts of interest with the payday loan industry.

Shortly after the Consumer Financial Protection Bureau began preparing what would become the first significant federal regulations for the multibillion-dollar payday-lending industry, Hilary Miller went to work, the Washington Post reported. Miller, an attorney who has worked closely with the industry for more than a decade, contacted a Georgia professor with a proposal: Would she like to test one of the chief criticisms of the industry, that its customers are harmed by repeatedly taking out loans? Over the next year, Miller worked closely with Jennifer Lewis Priestley, a professor of statistics and data science at Kennesaw State University, suggesting research to cite, the type of data to use and even lecturing her on proofreading. Priestley’s report ultimately concluded that taking out repeated loans didn’t harm borrowers, and, according to the emails, Miller discussed the results with a CFPB economist. It’s unclear how it factored into bureau decisions, but it has been repeatedly touted by payday lending supporters. The industry had a significant recent win: Earlier this month, the CFPB backed down from sweeping new regulations, potentially saving short-term lenders $10 billion through 2020. The CFPB says that it was not influenced by the industry’s lobbying on the issue. The bureau re-examined all existing evidence, including research supportive and critical of payday lending, and determined they collectively didn’t support the existing rule, said Marisol Garibay, a CFPB spokeswoman.

The federal Consumer Financial Protection Bureau betrayed financially vulnerable Americans last week by proposing to gut rules conceived during the Obama era that shield borrowers from predatory loans carrying interest rates of 400 percent or more, according to a New York Times editorial. The bureau’s proposal is based on a legally dubious rationale that will surely be challenged in federal court, according to the editorial. The agency’s abdication of its mandate to protect consumers underscores the need for state usury laws, which have passed in 16 states and offer the surest path to curtailing debt-trap lending. A 2014 bureau study of 12 million similar loans found that over 60 percent went to borrowers who took out seven or more loans in a row. In fact, a majority of loans went to people who renewed so many times that they ended up paying more in fees than the amount of money they originally borrowed. Among those trapped in this debilitating cycle were many people scrimping by on disability income. After years of research, the bureau in 2017 issued sensible regulations governing loans that lasted 45 days or fewer. The cornerstone rule required payday lenders to determine whether the borrower could repay the debt while still meeting living expenses. Read more.

*The views expressed in this editorial are from the publication cited, are meant for informative purposes only, and are not an official position of ABI.

Sen. Elizabeth Warren (D-Mass.) called on Kathy Kraninger, the new director of the Consumer Financial Protection Bureau (CFPB), to “immediately” rescind a proposal to weaken the payday lending rule, becoming the latest prominent Democrat to weigh in on Kraninger's first major initiative, Politico reported. “The rule you released today makes a mockery of the CFPB's statutory mission of protecting consumers. It should be withdrawn immediately,” Warren said in a letter on Wednesday to Kraninger. The CFPB on Wednesday proposed scrapping the ability-to-repay underwriting requirement at the heart of the agency’s 2017 rule reining in payday lenders. A senior CFPB official on Wednesday echoed industry concerns that the rule would have had “significant market effects,” cutting payday loan volume by as much as 90 percent.