Happy Wednesday and welcome back to On The Money. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
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THE BIG DEAL—Consumer bureau proposes scrapping borrower safeguards from payday loan rule: The Consumer Financial Protection Bureau (CFPB) on Wednesday proposed striking certain borrower safeguards from a 2017 regulation on short-term, high-interest loans.
The bureau on Wednesday kicked off a proposal to loosen the bureau’s rule on “payday” loans, a measure meant to protect vulnerable consumers from bottomless debt.
The proposed rewrite would eliminate underwriting provisions under the rule meant to ensure recipients of payday loans will have the ability to repay them despite high interest rates. I explain how here.
The background:
- The payday rule was a major priority for former CFPB Director Richard Cordray (D), who resigned from the agency shortly after the regulation was finalized in October 2017.
- It created new restrictions and standards for small-dollar lenders before they offer loans and limited the ways that lenders could acquire what they’re owed.
- Former Acting CFPB Director Mick Mulvaney announced in January 2018, shortly after he replaced Cordray, that the bureau would propose a drastic rollback of the payday rule. The announcement delighted the rule’s critics and set the stage for a heated battle over its future.
The proposal:
- The proposed rewrite would eliminate underwriting provisions under the rule meant to ensure recipients of payday loans will have the ability to repay them despite high interest rates.
- The CFPB will accept comments on their proposal for three months before analyzing feedback and submitting a rewrite of the rule for feedback.
- The bureau on Wednesday also sought to delay the deadline to comply with the rule until November 2020 ahead of what could be a lengthy and tense battle to finalize the rewrite.
Reactions:
Consumer protection groups, progressive nonprofits and Democratic lawmakers have fiercely defended the payday rule from Republican and industry attacks. Supporters of the rule say it’s a sorely needed protection from lenders that trap customers into debt they can’t afford to pay, then collect fees and settlements.
- “Eliminating these common sense protections will result in millions of hardworking families trapped in a cycle of debt and poverty,” said Sen. Sherrod Brown (Ohio), the top Democrat on the Senate Banking Committee.
- Rebecca Borné, senior policy counsel at the Center for Responsible Lending, said the CFPB “is siding with the payday loan sharks instead of the American people.”
- “The Trump administration’s political efforts to roll back the rule will hurt those who are being abused and mistreated by ruinous loans,” said Cordray, the former CFPB director.
Republicans welcomed changes to the rule, which they panned in 2017 as a drastic abuse of the CFPB’s authority that would choke off crucial credit products for consumers with limited options.
- Rep. Patrick McHenry (R-N.C.), said the update “will give consumers the opportunity to make their own decisions on credit availability needs for themselves and their families.”
But some in the financial services industry wants the CFPB to go even further with reeling back the rule.
- “The Bureau should examine all aspects of the rule to prevent unintended consequences for loans the original rule was not intended to cover,” said Richard Hunt, president and CEO of the Consumer Bankers Association.
- “We believe the 2017 final rule must be repealed in its entirety,” said Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), a trade group for short-term lenders.”
On tap tomorrow
- House Ways and Means Committee: Hearing on legislative proposals to mandate the disclosure of presidential tax returns, 10 a.m.
LEADING THE DAY
Negotiators running out of time to avert shutdown: It’s crunch time for lawmakers seeking to reach a deal on securing the border that would prevent the second partial government shutdown of 2019.
Lawmakers warn they have just a matter of days to reach a deal that could then be considered by the House and Senate and signed by President Trump by their Feb. 15 deadline.
Without an agreement by then, about 25 percent of the government would again shut down.
Negotiators say they face significant hurdles to reach a deal, including how much money to spend on physical barriers.
“I hope that we will do our job. Will we? That’s the question of the hour,” said Sen. Richard Shelby (R-Ala.), a chairman of the Senate Appropriations Committee. The Hill’s Jordain Carney and Niv Elis fill us in.
Trump nominates World Bank critic as its next chief: President Trump on Wednesday said he would nominate David Malpass, the Treasury Department undersecretary for international affairs and a critic of the modern development finance system, to be next president of the World Bank.
If approved by the World Bank’s board of directors, Malpass would lead the international lender’s efforts to fund economic development projects in poor and middling countries.
Malpass, the administration’s financial development ambassador, was among Trump’s top candidates and an early favorite to replace outgoing World Bank president Jim Yong Kim, who announced last month he’d be leaving the bank before his term expires.
The U.S. is the largest shareholder among the more 170 countries that pool their resources for the World Bank and has chosen each of its presidents since the lender opened in 1945. But Malpass’s fierce criticism of the World Bank and similar institutions could spark a fight over the bank’s future and end that precedent. I explain why here.
GOOD TO KNOW
- Treasury Secretary Steven Mnuchin on Wednesday said he and other U.S. officials will travel next week to Beijing for another round of trade talks with China.
- If President Trump follows through on plans to increase tariffs on Chinese imports next month, the U.S. economy would lose 934,000 jobs, according to an estimate published Wednesday by a pro-trade group.
- General Motors’s hourly workers will get profit-sharing checks of up to $10,750 this year, the company announced Wednesday.
ODDS AND ENDS
- T-Mobile and Sprint are ramping up their efforts to get regulators to sign off on their $26 billion merger, promising not to raise prices on consumers and tapping former public officials to help sell the deal.