Morning Scan CFPB takes aim at payday lending; Fed finally gets bank supervision vice chair

Editor's note: Morning Scan will not publish on Monday, Oct. 9 in observance of Columbus Day. We'll be back on Tuesday, Oct. 10.

Receiving Wide Coverage ...
The end of payday lending? The Consumer Financial Protection Bureau released its long-awaited rule regulating payday lenders. The rule requires lenders to evaluate whether borrowers can repay their loans while making it harder for customers to roll them over, which many of them typically do.

The rule is "likely to sharply curtail the use of payday loans, which critics say prey on the vulnerable through their huge fees," the New York Times said, while the Wall Street Journal was more fatalistic: "Lenders say the rule will wipe out the market for short-term payday loans." Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker

"These restrictions may seem well-intended, but they in effect allow loans only to unprofitable customers with good credit and prevent lenders from taking recourse against borrowers who don't pay their bills," the Journal's editorial board intoned. "As a result, many Americans will lose access to an important source of emergency cash."

The Journal editorial argues that the rule gives President Trump "more cause to dismiss the [CFPB] director," whom it sarcastically calls "President Cordray" in the headline. However, it laments, "Mr. Trump may be loath to make Mr. Cordray a progressive martyr by firing him. But his reluctance has allowed the director to do significant economic harm with the pay-day rule."

The CFPB's move came as the Office of the Comptroller of the Currency took its own action on small-dollar lending, rescinding its guidance on deposit advance products. The OCC argued it was so banks wouldn't be subject to potential conflicts with the CFPB rule, though the consumer agency suggested that was unnecessary.

Adios, Catalonia: Banco de Sabadell, Catalonia's second largest bank, said it is moving its headquarters out of the restive Spanish region, while CaixaBank, the biggest bank in the region and Spain's third largest, is considering doing the same. "The strategies underscore how the separatist drive is roiling Spain beyond politics and into the realm of business and economy," the Wall Street Journal noted. Wall Street Journal, Financial Times

Wall Street Journal
What took you so long?: In this third day of testimony on Capitol Hill, former Equifax CEO Richard Smith was asked by members of the House Financial Services Committee why the company took so long to disclose the massive data breach. Smith said he was notified about the severity of the breach on August 17, told the head of the board of directors five days later, and the full board on August 24 and 25.

"Is it normal to wait that long?" asked Rep. John Delaney, D-Maryland. "I thought that was an appropriate timeline," Smith replied.

New Fed banking czar: By a vote of 65-32, the full Senate approved Randal Quarles' nomination to the Federal Reserve Board, where he will be the Fed's first vice chairman in charge of bank oversight. That role, created by the 2010 Dodd-Frank financial reform law, had never been filled until now.

The future of money?: Christine Lagarde, the International Monetary Fund's managing director, says the agency's special drawing rights – which the Journal calls "a kind of artificial currency whose value depends on other currencies" – may one day become a digital currency and replace existing international currencies. "It's not a far-fetched hypothetical," she said, adding that the IMF needs to be ready.

Quotable
"The CFPB's new rule puts a stop to the payday debt traps that have plagued communities across the country. Too often, borrowers who need quick cash end up trapped in loans they can't afford. The rule's common-sense ability-to-repay protections prevent lenders from succeeding by setting up borrowers to fail." — CFPB Director Richard Cordray.