There is a growing battle between the federal and state governments and possible new regulations regarding the payday loan industry.
Earlier this month, the Washington Times spoke with a number of Florida financial regulators to discuss the Consumer Financial Protection Bureau’s (CFPB) potential interference in the state’s payday loan lending industry. The general message that regulators had was this: stay out of our way.
In March, the CFPB issued a series of proposed regulations that would apply to payday loan stores across the United States, thereby cancelling out state regulations.
This has irked Drew Breakspear, the commissioner of Florida’s office of financial regulation, who says if the CFPB wanted to do something then it would apply the Sunshine State’s rules nationwide.
“People who take payday loans, some of them are desperate,” said Breakspear. “There’s a large base of people who need the loans. Yes, they’re expensive. But if you take them away, what do you replace them with?”
Chris Lions asked the CFPB committee, “Do you really think taking away the only source of money these people have is going to improve their situation?”
Despite the pleas, the CFPB still plans to go ahead with its federal regulations, say a number of sources speaking on the condition of anonymity.
Reportedly, CFPB director Richard Cordray spoke at an off-the-record meeting in Florida over the weekend to discuss the proposed regulations. During this meeting, Cordray confirmed that he would not cave into the demands of Florida to use it as the standard bearer of bad credit loan rules.
One of the reasons for this is because he takes exception with Florida’s rules on the number of payday loans a consumer can take out over the course of a year.
When Cordray’s attention was brought to the fact that his federal consumer finance watchdog’s proposals would send a lot of the state’s payday loan businesses to close their doors, those at the meeting say he wasn’t necessarily concerned. However, he noted that he would take these concerns into account.
“We cannot comment on what the upcoming proposal will include,” said Jennifer Howard, a spokeswoman at the CFPB, in a statement. “In general, making sure that someone has the ability to repay a loan is common sense. In a healthy market, lenders benefit by extending loans that borrowers can afford, not by pushing borrowers into debt traps.”
Joni Shockey, a spokeswoman for State Representative Dennis Ross, stated that the off-the-record meeting allowed the Florida delegation to highlight just how well the state’s model has been, and it’s something the CFPB should look into.
“The demand for short-term capital and loans will not disappear, but access to well-regulated products offered in the state of Florida might,” Shockey said. “This is a bipartisan issue for the Florida delegation.”
It was noted that there were several legislators there that were working to exempt Florida from the CFPB’s body of rules.
Details of the CFPB’s list of new rules is still vague, but a brand new, in-depth guideline will be released sometime this month.
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