March 12, 2019

Van Hollen Presses CFPB’s Kraninger on Proposed Rollback of Payday Lending Consumer Protections

“You are opening the door to bad actors – it’s really outrageous”

Today U.S. Senator Chris Van Hollen (D-MD) questioned Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger on the Bureau’s recent proposal to roll back rules to protect consumers from predatory payday lending practices. Senator Van Hollen raised his concerns regarding abusive lending practices that take place in the payday lending industry at the Senate Banking, Housing, and Urban Affairs Committee hearing. A transcript of their exchange is below, and video of the hearing is available here.

SENATOR CHRIS VAN HOLLEN, D-MD: Thank you Mr. Chairman and thank you Ms. Kraninger. I am very concerned about your decision to first delay and then rescind the mandatory underwriting provisions of the payday lending rule. It seems to me you’re giving a total greenlight to predatory lenders around the country to take advantage of consumers. Senator Merkley, myself, and 47 Senators sent you a letter on February 13th on this issue. Did you get it?


VAN HOLLEN: Have you responded as of today?

KRANINGER: I believe we did.

VAN HOLLEN: I just checked with Senator Merkley’s office about the letter –

KRANINGER: Oh, I’m sorry, Senator. The response is due on Friday. We are pulling the response together.

VAN HOLLEN: I think it would have been useful, knowing that you were going to come in front of this Committee, to give us a response. It’s been almost a month –

KRANINGER: I understand, Senator. I think the due date was actually in the letter, but I recognize that – that’s not satisfactory

VAN HOLLEN: It probably said before that date, and since we’ve got a hearing today, it would have been useful to have that information. I’m looking at both the notice you provided in the federal register on the delay rule and the rescind proposal. Let me ask you this. Bank regulators, for years, have found that an aspect of predatory lending is deliberately lending to people that do not have the ability to repay their loans and relying, instead, on their ability to seize the collateral of those consumers – whether it’s a house or a bank account. So, if you can tell me why payday lenders should be allowed to have a business model where they prey on people who cannot afford to repay their loans – why should we carve out that particular exception for payday lenders?

KRANINGER: Senator, the reason for the reconsideration of the rule is the underlying legal and factual basis around the Bureau’s determination of unfairness and abusiveness, without those underwriting rules, as you noted. And that is the issue at hand –

VAN HOLLEN: So, you’re rescinding a rule that’s designed to protect consumers, right?

KRANINGER: That was certainly the opinion of the agency at the time. And, again, we’re looking at that. And, I have an open mind –

VAN HOLLEN: I’m just reading your documents, here. You’re proposing to rescind it. Are you not?

KRANINGER: Yes, Senator.

VAN HOLLEN: The CFPB – when they put that rule in – they did a lot of research. One of their findings was four out of five payday loans ends with the borrower unable to pay or having to take out another loan to pay off the first. Do you dispute that finding?

KRANINGER: No, Senator. But that was also a finding in the context of many other findings –

VAN HOLLEN: I’m just asking you on that finding. They also found that over 60 percent of loans result in borrowers paying more in interest and fees than the amount they borrow. Do you dispute that finding?

KRANINGER: Senator, that was again, one of the findings amongst –

VAN HOLLEN: It was a finding. I’m asking you whether you dispute the finding.

KRANINGER: No, Senator. I do not dispute the analysts’ finding in the final report.

VAN HOLLEN: Thank you. I’m looking at your analysis here now. Are you familiar with the Dodd-Frank Act Section 1022-b3 analysis that accompanied the notices?

KRANINGER: Yes, Senator.

VAN HOLLEN: And, are you familiar with the fact that you found that the payday lending industry, on an annualized basis, would save about $7.3 to $7.7 billion that they would not otherwise have under the previous rule?

KRANINGER: Senator again there were a number of things that were looked at including –

VAN HOLLEN: I’m just asking you about this provision which is right here in the documents you submitted. Does it conclude that by rescinding the rule on an annualized basis payday lenders will be able to pocket $7.3 to $7.7 billion dollars more? Isn’t that what it says right here?

KRANINGER: Yes, Senator it does.

VAN HOLLEN: That’s what it says. And isn’t that money coming from harming consumers? These are consumers that the previous analysis concluded could not pay these loans on time. Is that not that true?

KRANINGER: Senator –

VAN HOLLEN: Is that not true?

KRANINGER: Senator, yes I understand where you’re getting.

VAN HOLLEN: It’s not where I’m getting. I’m just looking at the facts. Is that not true?

KRANINGER: There are a number of facts here. And we had a responsibility to look at the full record of this rule-making. We’re in litigation actively on the issue so the rule is already stayed. And the Bureau did pledge to the court that the reconsideration will be part of its process

VAN HOLLEN: You chose to move forward on this decision and rescind the rule. Right? That was your decision?

KRANINGER: Absolutely.

VAN HOLLEN: And in your own documents it says, does it not, that the payday lending industry will pocket over $7.3 billion additional dollars on an annualized basis. Isn’t that what it says right here in your own analysis?

KRANINGER: Yes Senator.

VAN HOLLEN: And isn’t it true that based on the previous analysis that $7.3 [billion] is coming from harm due to consumers by payday lending. Isn’t that true?

KRANINGER: Senator there are 12 million consumers that take advantage of payday loan products in the states where they are allowed to do so. The states have looked at –

VAN HOLLEN: The question is not whether we should just pull off the reins off payday lending which is what you trying to do. The question is whether we should be protecting consumers. I’d like an answer to my question. Isn’t it true that that $7.3 billion dollars that you say will now be in the pockets of the payday lending industry is a result of harm done to consumers according to the previous analysis by your Bureau?

KRANINGER: And Senator I will note that there are 12 million –

VAN HOLLEN: I’m just looking for a yes-no answer on that $7.3 billion dollars.

KRANINGER: But again individuals are accessing these products and making the best determination –

VAN HOLLEN: I know they’re accessing these products and then when they can’t pay them back – when the lender should’ve known it –they’re coming after their cars and other possessions. Isn’t that true?

KRANINGER: Consistent with state law. But again there are places where that is not the case.

VAN HOLLEN: But isn’t it your job to protect people from predatory lending – where people are just scamming and taking advance of people’s situations? Isn’t that your job?

KRANINGER: Senator, taking action against bad actors who are engaged in what you’d expect to be predatory activities, yes.

VAN HOLLEN: You are opening the door to bad actors. It’s really outrageous what you’ve done here – outrageous. Because there were protections in place based on a detailed analysis, and your own writings show that you’re just going to give a big payday to payday lenders. Thank you Mr. Chairman.