Small payday lenders are asking lawmakers to force the Consumer Financial Protection Bureau (CFPB) to evaluate how the agency’s plan to regulate the payday lending industry will impact small businesses.
In a letter to Sen. David Vitter (R-La.) and Rep. Steve Chabot (R-Ohio), chairmen of the respective House and Senate committees on small business, the seven small payday lenders chosen to review the CFPB’s regulatory framework in March said they had difficulty engaging constructively with the agency.
The first written material they received, they said, failed to include small-business specific data.
“In fact, many of our fellow lenders believe the CFPB is trying to eliminate the payday lending industry and only conducted the Small Business Regulatory Enforcement Fairness Act (SBREFA) process to try to prevent its regulation from being overturned in court,” their letter said.
The CFPB is one of three agencies that has to convene a Small Business Advocacy Review panel any time it plans to issue a rule that will significantly impact a substantial number of small businesses.
In their letter, the lenders, which included Thrifty Loans LLC of Ruston, La. and Payne’s Check Cashing of Culpepper, Va. said they were frustrated that the bureau lacked an understanding of how state regulatory authorities work with them to protect consumers.
“It was even more frustrating that bureau officials
could not identify failings in the state regulatory framework that would prompt a federal overlay of new regulatory obligations, and that bureau officials admitted they had not even analyzed the existing state programs,” they wrote.
The businesses said they are also frustrated with the CFPB’s lack of appreciation for the relationships they have with their customers, people they say who have nowhere else to go for short-term loans.
“We worry that the CFPB does not understand this critical fact: if the CFPB proposal advances, our customers will fall victim to unregulated and unlicensed lenders and inferior forms of credit.”
The business have asked the agency to reconvene the SBREFA process once it completes an analysis of existing state regulations and how its proposal will operate consistently with those requirements, and provide an assessment of the impact on small lenders, as well as the cost and availability of credit to small businesses. They said they have yet to get a response.
“We spent a great deal of time educating the CFPB about how we operate our small businesses and the novelty of relationship-based lending, as well as describing our customers and their financial needs,” they said. “That time will be worth the effort if the CFPB listens to our suggestions and incorporates our concerns into its approach for federal regulation of our industry.”
Category: Payday loans