By Amit Narang, Public Citizen
A couple weeks ago, VICE did some incredible and shocking reporting about an attempt by the predatory payday lending industry to sabotage proposed rules designed to finally rein-in industry practices that have ruined lives by trapping far too many Americans into endless cycles of debt. Payday lenders take advantage of consumers by charging astronomical interest rates and fees, requiring people to take out strings of additional loans that stack up into insurmountable piles of debt.
The staggering amount of debt people are in because of payday loans is shocking, but it’s also shocking how hard industry is fighting these commonsense consumer financial protections. At least it’s shocking to those who are not familiar with corporate America’s all too successful tactic of gaming the process that agencies use to produce new regulations that benefit consumers. Industry does that by turning that very same regulatory process against the rules meant to help people. For those of us at Public Citizen who are constantly trying to defend consumer regulations from being blocked or diluted by industry, this is an all too common theme and very much the rule rather than the exception.
VICE uncovered insider documents at a predatory lending industry conference showing exactly how the industry planned to attack and undermine the critical new predatory lending regulations that the U.S. Consumer Financial Protection Bureau (CFPB) has proposed to put in place. The conference was organized by the Consumer Financial Services Association of America, the industry’s trade group, and held at the posh Atlantis resort in the Bahamas.
In multiple sessions, participants in the predatory lending industry learned one of the major strategies to defeat the new CFPB rules: turn the very customers the industry fleeces with high interest loans into the public face of the campaign to defeat restriction on those loans. In truly cynical fashion, predatory lenders were encouraged to “get every customer that comes into your store… to write out a handwritten letter and tell the bureau why they use the product, how they use the product, and why this will be a detriment to their financial stability.” In short, the very borrowers that would be protected from the kinds of debt entrapment loans that the CFPB will potentially prohibit would be used as the key voices arguing against those new rules.
Making matters worse, borrowers might not even know that they had signed up for this campaign to sabotage the predatory lending rules. The article describes previous attempts by the industry to trick customers into submitting comments against restrictions on predatory loans at the state level.
Of course, federal agencies do want to hear from the public about proposed rules in order to improve them before they are finalized. Indeed, the public comment period is an important way for the public to meaningfully participate in giving their opinion, as long as it’s done on a good-faith basis.
The problem here is that the predatory lending industry knows there is significant grassroots support for the new CFPB rules—no one wants loan sharks to take advantage of consumers. So they schemed to find a way to counter that with their own “flood” of comments without making it look like they are all coming from industry groups that will benefit from killing the new rules. That’s why they’re exploiting their customers and pushing them into submitting a comment.
As the article notes, making it look like there’s real grassroots opposition to the CFPB rules is a key tactic in a broader overall goal of trying to delay the new rules as much as possible so the predatory lenders can keep their business model going as long as possible.
The big takeaway is that whenever agencies like the CFPB put out new rules to protect the public by holding Big Business accountable, the response of Big Business is to use every opportunity in the regulatory process to delay rules. And as our chart of the regulatory process shows, there are a lot of opportunities — far too many, in fact.
That’s why this summer Public Citizen released a groundbreaking report showing just how long it takes for our government agencies to put in place the most important new rules that protect the public. The results were shocking. At most agencies, it takes almost an entire presidential term, four years in other words, to get out a major new rule. Even worse, the trend is going in the wrong direction, with rules finished this year holding the record for the longest rulemakings over the last twenty years. So if you’re keeping score at home, it looks like the Big Business delay strategy is working pretty well.
The good thing is there’s a way to take action. You can make sure your voice is heard in support of new proposed rules to limit predatory lending over the fabricated ones that the industry puts forward, by taking action to support a strong rule to protect consumers from payday loans.
Finally, as some Republicans in Congress continue to try to rig the regulatory system with more opportunities for industry delay, keep a lookout for other ways to engage with your elected members to make sure they know you oppose any legislation that harms the ability of agencies to write rules to better protect the public.