This Month in DC: Payday Loan Rule Survives, but Dodd-Frank Does Not

May was a big month for consumer protection laws in DC. We won a significant victory in the fight against predatory lending, but we also saw Congress roll back key provisions intended to prevent another recession.

Payday Loan Rule Survives

After months of Congress threatening to repeal the Consumer Financial Protection Bureau’s payday loan rule, the deadline expired for them to do so. After calls, letters, social media, and pressure from advocates across the country, Congress did not have enough votes to overturn the rule, and so the payday loan regulations are intact.

This is a huge victory for Illinois families!

The new payday loan rule requires lenders to make loans only after they have determined whether the borrower can afford to pay it back. This is a commonsense measure that is designed to protect people from being trapped in predatory high-cost loans. Read our analysis for more information about how the payday rule will affect Illinoisans.

The work to protect the national payday loan rule is not over. Under Mick Mulvaney, the Consumer Bureau has announced that they are going to reconsider the payday rule, likely with the intention to weaken it significantly. We will continue to work with local and national partners to advocate for the preservation and enforcement of these important protections from predatory lending.

 

Congress Rolls Back Key Protections in Dodd-Frank Act

While May was a victory for consumers regarding payday loan protections, Congress has continued its assault on consumer protections that make the financial system more equitable for low and middle income families. This month, we unfortunately saw attacks on housing and mortgage protections through S. 2155. This bill rolls back protections in the Dodd-Frank Act, which were put in place after the Great Recession to help protect consumers from discriminatory and predatory banking practices.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, also known as Dodd-Frank, was passed as a response to the economic recession of 2008. It brought stricter regulation and oversight to the financial industry, and it created the Consumer Financial Protection Bureau, which has since proven to be a crucial watchdog for consumers in the financial system.

S. 2155 was signed into law last week by the President and it rolls back important provisions in the Dodd-Frank Act. Some of the items us and fellow advocates are concerned about include:

  • It exempts over 85 percent of depository institutions from full reporting of loan data under the Home Mortgage Disclosure Act (HMDA). HMDA is critical to uncovering discrimination in lending practices.
  • It creates a new exemption for the sale of manufactured homes from mortgage lending protections. This exemption would make it easier for sellers of manufactured homes to steer customers into overpriced loans.

This could expose all of us to some of the same risky and predatory financial practices that led to the financial crisis of 2008.

Even with these setbacks, the fight for safe and equitable consumer protections is not over. We will continue to advocate for an equitable financial system at both the state and federal level. Stay tuned for more developments and opportunities to take action by signing up for our emails, checking out our take action page, and following us on Twitter.

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