Saturday, May 18, 2024

Watchdog readies crackdown on predatory lending after Supreme Court win. (WaPo)

For NFIB and Chamber of Commerce members, do you know how your dues are being spent? How do you feel about predatory lending?  We will pray for you.  From The Washington Post:

Watchdog readies crackdown on predatory lending after Supreme Court win

More than a dozen lawsuits and investigations faced delays as the Consumer Financial Protection Bureau battled back a constitutional challenge over its funding.

May 17, 2024 at 2:18 p.m. EDT
Rohit Chopra, director of the Consumer Financial Protection Bureau, introduces President Biden at the White House on March 5. The agency won a Supreme Court case this week that challenged its funding mechanisms. Some of its enforcement actions had been slowed in court during the case. (Gabriella Demczuk for The Washington Post)
8 min
Add to your saved stories

The Consumer Financial Protection Bureau plans to restart its aggressive crackdown against payday lenders and other companies that offer high-cost, short-term loans to poor borrowers, after a Supreme Court ruling this week resolved a challenge to the federal agency’s authority to act.

The decision is expected to ease some of the persistent political and legal obstacles at the CFPB, where powerful financial firms had blocked regulations, jeopardized the bureau’s funding and used the uncertainty generated by their battle to ward off recent probes and punishments.

The dispute began in 2017, when the watchdog agency issued rules preventing payday lenders from offering expensive loans to low-income Americans who could not afford to pay the money back. Under President Donald Trump, the agency later eliminated some of those protections, but payday lenders still pressed forward with a lawsuit, which came to hinge on the bureau’s unique funding structure.

On Thursday, a Supreme Court majority found the funding system was constitutional, denying opponents a ruling that could have invalidated much of the CFPB’s past work. Rohit Chopra, the bureau’s director, said in an interview he planned to seize on that victory and advance a fuller agenda to combat predatory lending — while seeking to penalize those that had dodged accountability until now.

“What we saw during the pendency of the Supreme Court case was a lot of corporate defendants and individuals refusing to accept that they had to comply with the law,” he said. “For victims of these companies, that has all been on hold. So what we are doing right now is getting all of it restarted.”

To start, the CFPB hopes to begin implementing its long-delayed payday lending rules, which sparked the Supreme Court case. The regulations are narrower than first envisioned: They primarily would prevent payday and car-title lenders from trying to withdraw money repeatedly from customers’ bank accounts.

The policy aims to protect cash-strapped borrowers from multiple failed payments, which carry the risk of costly bank overdraft charges. But the exact date when the rules will take effect is unclear, since payday lenders signaled Thursday they planned to challenge the government again in federal court.

The CFPB also plans to resume work on at least 14 known lawsuits and investigations that have been stalled in the face of legal uncertainty, according to senior agency officials, who spoke on the condition of anonymity to describe their strategy. Some of the targeted companies had ties to the Supreme Court challenge against the CFPB — and later leveraged it to secure temporary relief in their own court fights.

The cases primarily involve short-term lenders and other companies that allegedly profited after levying large fees on their customers, including military service members and poor families. That includes ACE Cash Express, a lender sanctioned by the government in 2022 after it allegedly earned $240 million from its “illegal practices,” the CFPB said in public statements at the time.

Roughly two years later, the matter remains unresolved, after lawyers for ACE and its parent company, Populus Financial Group, persuaded a federal judge to pause the CFPB’s lawsuit while the courts weighed the future of the financial watchdog. The company did not respond to a request for comment.

“On the enforcement side, there were a lot of cases put on hold in the district courts,” said Mike Silver, a partner at the law firm Husch Blackwell who served for more than a decade at the CFPB before leaving earlier this year. “I do think this will put some wind in the sails of the CFPB’s enforcement.”

For now, the Supreme Court ruling amounts to a pivotal legal victory for an agency formed to fill regulatory gaps in the aftermath of the 2008 financial crisis. Since its inception, the CFPB has faced relentless assault from companies that reject its oversight and congressional Republicans who hope to eliminate it entirely.

In a sign of those lingering schisms, President Biden this week heralded the agency’s victory, estimating the CFPB had delivered $9 billion in consumer relief to Americans during his administration. But Republicans largely chastised the court, foreshadowing a robust effort to weaken or eliminate the CFPB if the party wins the White House or Congress in the 2024 election.

“Despite the setback from today’s ruling, Republicans will continue the fight to rein in the rogue CFPB,” said Rep. Patrick T. McHenry (R-N.C.), who leads the House Financial Services Committee. “It’s past time the CFPB is held accountable to the American people through their elected representatives.”

At the center of the Supreme Court case were payday lenders, acting through their chief lobbying group, the Community Financial Services Association of America. Even before the CFPB could implement its rules, the group mounted an all-out assault, a strategy that included significant campaign contributions to Trump, who as president fulfilled his promise to scale back its power.

By the time the lawsuit reached the nine justices for oral arguments last fall, the political landscape had changed dramatically. The organization known as CFSA had been subsumed by a new industry lobbying group, and the bureau, now under Biden, had amassed tens of thousands of complaints from Americans urging it to take action against payday lenders. But the financial watchdog repeatedly struggled to advance some of its probes and punishments, especially over the last two years, as the companies under its microscope began to weaponize the legal uncertainty they had created.

In 2022, for example, the CFPB sued MoneyLion, an online lender, for imposing “illegal and excessive charges on servicemembers and their dependents,” a set of practices that allegedly violated federal laws protecting military personnel.

The case plodded along until last December, when MoneyLion and its subsidiaries convinced a federal judge in New York to halt the proceeding. The companies’ lawyers pointed to the unresolved fight over the CFPB’s finances at the Supreme Court, arguing that an adverse ruling against the federal agency would have invalidated its entire investigation. MoneyLion did not respond to a request for comment.

Similar delays hampered at least eight other CFPB lawsuits, court records show. In at least five additional instances, financial firms cited the justices’ ongoing deliberations as a way to slow down federal probes into their potential abuses.

One of the investigations targeted Purpose Financial, the parent of the installment lender Advance America. In a court filing last June, the CFPB said it opened an inquiry to determine if the company had “improperly induced borrowers to take out, renew, or refinance loan products that harmed them.” But the lender, which denied the charges, repeatedly refused to turn over the documents demanded by the CFPB.

The stalemate prompted the government to petition a federal judge in South Carolina, seeking help in enforcing its investigative demands. Instead, lawyers for Purpose Financial persuaded the court in December to pause the proceedings entirely until the Supreme Court decided the bureau’s fate.

A spokesperson for Purpose Financial did not immediately respond to a request for comment.

Facing the prospect of a more emboldened, aggressive CFPB, some of the nation’s largest financial institutions this week sounded a dour note. The American Bankers Association, a lobbying group whose members include Bank of America, JPMorgan Chase and Wells Fargo, pledged in a statement Thursday that it would “continue to advocate for our members and their customers including through litigation where necessary.”

Many of these companies have waged their own political and legal battles against the CFPB in recent months, joining a groundswell of corporate opposition to many of Chopra’s proposed rules. Banks have lobbied against the government’s attempt to cap overdraft fees, for example, while Apple, Google and Venmo have fought a plan to treat their digital payment apps similarly to traditional bank accounts.

And groups like the U.S. Chamber of Commerce notched a major victory earlier in May, when a federal judge in Texas halted the CFPB’s rules limiting most credit card late charges to $8 per month. The court premised its injunction on a previous ruling in the Fifth Circuit against the CFPB and its funding — the very matter that the Supreme Court rejected on Thursday.

Hours after the justices issued their decision, lawyers for the payday lending industry informed judges in the Fifth Circuit that they planned to continue the fight. The industry’s sustained opposition arrived as many of its executives continued to pour money into Republican campaigns, including Trump’s bid to retake the White House, in the hopes of securing a more friendly regulatory environment.

“Certainly the fight to save the consumer watchdog is hardly over,” said Lauren Saunders, the associate director of the National Consumer Law Center, as she celebrated the ruling from the Supreme Court steps. “The attacks on it continue.”

Tony Romm is the economic policy and accountability reporter at The Washington Post.  Twitter

‘It’s a threat’: Tampa man said he would ‘plant a bomb’ in U.S. Rep’s office, DOJ says

‘It’s a threat’: Tampa man said he would ‘plant a bomb’ in U.S. Rep’s office, DOJ says

No comments: