While it’s true that Kraninger went forward with a modest measure to revise the bureau’s preexisting small-dollar loan rule in July, it’s wrong to argue that this was without cause or anti-consumer. In fact, Obama-appointed Director Richard Cordray’s previously proposed rule would have led to the near-elimination of the industry, wiping out $11 billion in consumer credit. This would have greatly harmed the 12 million Americans who use small-dollar loans each year, potentially stripping these consumers of a vital source of credit and forcing them to choose between financial ruin or borrowing from dubious “loan sharks” who offer illegal loans and often threaten physical violence.
Additionally, efforts to rewrite and issue a final rule had been under way long before the start of the pandemic. The original public statement that announced that the bureau was looking to reconsider and delay implementation of the rule came in October 2018, during the tenure of Kraninger’s predecessor, Acting Director Mick Mulvaney. In February of 2019, the bureau, now under the leadership of Director Kraninger, formally introduced two proposals to delay the compliance date and rescind the mandatory underwriting portion of the rule. Stakeholders then had months to comment on the proposals (CEI’s comments can be found here), and despite expecting it to be released sooner than it was, the final rule wasn’t issued until last month—well over a year after the original proposals were released.
While the final rule should have gone further and gotten rid of Cordray’s small-dollar loan rule entirely, the bureau did right in striking the egregious ability-to-repay requirement, which was a paternalistic attempt to restrict borrowers’ ability to make their own financial decisions. If a borrower had the ability to repay, she would have not utilized a payday loan and instead opted to use their credit card or savings. This requirement would have effectively denied credit to those consumers who need it the most. Rescinding the ability-to-repay provision will ensure access to credit for cash-strapped consumers who may not be able to turn to other sources of credit.
In addition to this action, the new no-action letter policies that the bureau unveiled in May will help consumers make better financial choices and access new and innovative financial products.
Beyond the question of payday lending deregulation, Olen makes the argument that Kraninger has “shown little interest in doing her purported job” by putting “the interests of the wealthiest segments of our economy over the well-being of everyone else.” While Olen never details what she thinks Kraninger should be doing exactly, Olen nonetheless asserts that Kraninger isn’t doing what she should.
In actuality, Kraninger has done a great deal to help consumers since the start of the pandemic. In her recent testimony before the House Financial Services Committee, Kraninger noted that the bureau has produced more than 70 blog posts and videos to help educate consumers and assist them in managing their finances during these hard times. Those resources have been accessed directly by more than 3 million users and been sent out to over 41 million users thanks to the bureau’s social media reach and efforts to make the materials available in seven different languages. The bureau has also released materials that cover new COVID-related programs, including stimulus payments, student loan payment suspension, mortgage forbearance, and the paycheck protection program. It also has created a consumer relief guide for foreclosure protection and an elder fraud prevention and response networks development guide to help combat elder financial exploitation.
Even more off the mark is Olen’s accusation that Kraninger’s financial knowhow is “limited to how she can best serve the all-powerful financial sector.” Since her previous testimony in February, Kraninger has requested that Congress allow the bureau to compensate whistleblowers exposing fair lending violations. The bureau also just issued a request for information in July on how to best prevent credit discrimination and expand access to credit.
While CEI continues to hold the belief that the CFPB is unconstitutional and questions whether we need a government agency dealing in financial literacy and education, it is nonetheless hard to make the argument that Kraninger is sitting on her hands or inattentive to consumers’ wellbeing.