Payday Lenders Sue Federal Regulator on `Draconian' Rule Change
(Bloomberg) -- Trade groups for consumer credit companies specializing in short-term, high-interest-rate loans, often referred to as payday loans, sued the Consumer Financial Protection Bureau in federal court in Austin, Texas, to block proposed rule changes the firms claim will wipe out their industry.
- Payday lending trade groups claim rule changes -- aimed at auto-title loans, short-term installment loans and payday advances -- restrict loans solely to borrowers who can afford to repay under the loans’ original terms, which eliminates most of their clientele
- Payday lenders claim 12 million Americans a year who rely on these loans as a “financial lifeline” may be forced into more expensive credit with riskier lenders
- Lenders claim the CFPB rules reflect a “deeply paternalistic view” that consumers can’t be trusted to make their own financial decisions
- Though acting director Mick Mulvaney is named in the complaint filed Monday, the rules being challenged were finalized in October 2017, when Obama-appointee Richard Cordray was the director
- The case is Consumer Financial Services Association of America Ltd. v. Consumer Financial Protection Bureau, 1:18-cv-00295, U.S. District Court, Western District of Texas (Austin)
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