CEI Letter to OMB Requesting Rejection of CFPB “Payday Lending” Rule
Dear Ms. Rao:
The Competitive Enterprise Institute (CEI) hereby requests that OMB reject the information collection request currently pending before it for the Consumer Financial Protection Bureau’s (CFPB) final “Payday Lending” Rule. The rule, formally titled the Payday, Vehicle Tile, and Certain High-Cost Installment Loans Rule, was published on Nov. 17, 2017. 82 FR 54,472. The rule was accompanied by an information collection request (reference No. 201711-3170-002). Under 44 U.S.C. 3507(d)(4)(C) and 5 C.F.R. § 1320.11(h), the deadline for OMB action on that submission is January 16, 2018.
For the reasons set forth below, CEI submits that CFPB’s information request is totally inadequate under the PRA’s requirement that unreasonable burdens not be imposed on industry and consumers. Requiring more burdensome paperwork on small dollar loans than on a $250,000 mortgage is excessive. Requiring loan providers to collect a consumer’s housing expense, required payments under debt obligations (including outstanding loans), child support obligations, and alimony obligations, and all potential sources of income and then calculate from this and other information the ability to repay the loan turns loan providers into financial planners and goes well beyond what is necessary. Contrary to the PRA, CFPB has failed to properly assess these and numerous other burdens.
It is true that CFPB is an independent agency and that independent agencies “administered by two or more members of a commission, board, or similar body” can override the determination of the OMB under the PRA.[1] However, under the Dodd-Frank Act which created it, CFPB is a single-headed agency and therefore does not fall under this provision of the PRA.[2] Moreover, even under the PRA provision, OMB is still responsible for making a determination in the first instance regarding PRA compliance; it is CFPB which must affirmatively override that determination if it chooses to.[3]
Identity of the Requester: CEI is a nonprofit 501(c)(3) organization, founded in 1984, dedicated to opposing government economic overregulation. CEI has long been active in economic and financial regulatory issues, and is currently involved in a court challenge to the constitutionality of CFPB’s structure. CEI staff have written extensively on the Payday Loan issue, and filed comments on the proposed rule. CEI, along with the 60 Plus Association and the State National Bank of Big Spring, Texas, are challenging the constitutionality of CFPB in State National Bank of Big Spring v. Lew.[4] Our challenge is being held in abeyance pending the resolution of PHH Corp. v. CFPB.[5] Some recent reports by CEI on the issue of the payday loan and CFPB include: Ending Payday Lending Would Harm Consumers,[6] How Dodd-Frank Harms Main Street,[7] and The Case against the Consumer Financial Protection Bureau: Unconstitutionally Structured and Harmful to Consumers.[8]
Most recently CEI filed comments on this very rule.[9] In that comment, we explained why the rule was such a bad policy. In this request, we focus not on how bad the policy is, but on the extensive and unnecessary paperwork burdens imposed by this rule.
[1] 44 U.S.C § 3507(f).
[2] 12 U.S.C. § 5491(a), (b).
[3] Another provision in the Dodd Frank Act requires OMB to treat CFPB rules “on the same terms and conditions as apply to any rule or order prescribed or proposed by the Board of Governors of the Federal Reserve System.” 44 U.S.C. § 3513(c). However, this does not mean that the CFPB and the Federal Reserve Board are to be treated the same, only that the same “terms and conditions” apply. One of these conditions is that, as with other multi-member independent boards, at least two Fed Reserve board members are required to overrule OMB. The Board of Governors can usually satisfy this condition since it normally has seven members, but this is not always the case. For example, if the Board of Governors were to have six vacancies and only one member during some time period, it would be unable to overrule the OMB. Since CFPB has only one member (its director), it too cannot overrule OMB. And once again, under the PRA, it is OMB that must first make the determination.
[4] State National Bank of Big Spring, et al. v. Lew, et al., Case No. 12-1032 (D.D.C. held in abeyance pending outcome in PHH Corp. v. CFPB July 12, 2016).
[5] PHH Corp. v. CFPB, Case No. 15-1177 (D.C. Cir. en banc oral argument May 24, 2017).
[6] Hilary Miller, Ending Payday Lending Would Harm Consumers, Oct. 5, 2016, https://cei.org/sites/default/files/Hilary_Miller_-_Ending_Payday_Lending_Would_Harm_Consumers.pdf.
[7] Iain Murray, How Dodd-Frank Harms Main Street, July 20, 2015, http://www.cei.org/sites/default/files/Iain%20Murray%20-%20How%20Dodd%20Frank%20Harms%20Main%20Street.pdf.
[8] Iain Murray, The Case against the Consumer Financial Protection Bureau: Unconstitutionally Structured and Harmful to Consumers, September 2017, https://cei.org/sites/default/files/Iain%20Murray%20-%20The%20Case%20against%20the%20Consumer%20Financial%20Protection%20Bureau.pdf.
[9] Ian Murray and John Berlau, Comments of the Competitive Enterprise Institute, Oct. 7, 2016, https://www.regulations.gov/contentStreamer?documentId=CFPB-2016-0025-143356&attachmentNumber=1&contentType=pdf.