CFPB's payday rule cuts states off at the knees
Since its inception, the Consumer Financial Protection Bureau has consistently hurt the consumers it purportedly protects. And while acting Director Mick Mulvaney has worked diligently and miraculously to improve this agency, the sins of CFPB’s past continue to torment our republic today.
During the Obama administration, the CFPB went beyond its stated purpose of leveling the regulatory playing field and became a tool of the political left to issue rules based on partisan ideology and to impose crippling financial penalties that some courts later ruled to be unreasonable and excessive.
As a former Member of Congress and as the attorney general of Louisiana, I have witnessed the abuse of power in a plethora of fields by the executive branch. Each one has renewed my passion and support for the separation of powers. But it seems the CFPB’s incessant capricious decision-making and abuse of authority have fueled my fire for federalism even more.
One of the CFPB’s most egregious offenses is its short-term, small-dollar lending rule, which has allowed federal bureaucrats to usurp successful state laws and regulations governing lending. For the economic liberty of our people and the sovereignty of our states, Congress must use its powers under the Congressional Review Act to combat this federal encroachment.
So last year, I joined many other attorneys general in petitioning congressional leaders to take action. And we were not alone in the cause. The CFPB’s own estimates are that out of the 1.4 million comments received on their proposed rule, over 1 million were opposed to the rule. However, our voices were silenced by the CFPB and its unilateral decision to impose this one-size-fits-all standard created in the backrooms of D.C.
Our criticisms then remain equally as valid now. This CFPB rule was levied without sufficient input from the states, it interfered with existing state consumer protection laws and lending standards, and it severely restricted the availability of short-term credit to communities most in need of credit options. Ensuring citizens have options to obtain credit when traditional avenues through financial institutions are unavailable is a critical issue in my state and across our nation.
As Louisiana’s chief legal officer, I take seriously my duty to protect our state’s consumers and I work closely with our duly elected legislators on consumer protection matters. Accountable to their constituents, state legislatures regularly find the appropriate balance between reasonable lending safeguards and the citizenry’s need for short-term credit. In their wisdom, state legislators have empowered state attorneys general and prosecutors to prosecute fraudulent lending practices.
However, the CFPB rule has had the effect of restricting state enforcement efforts. Local discretion morphed into onerous decrees by the federal government. This violation of state authority is a disservice to borrowers as it restricts the small lending industry who oftentimes serves the working poor in most need of these sorts of credit options. Those struggling families are then forced to use less-regulated options that are more expensive and more risky.
So I again renew my call to Congress to act to reverse the CFPB’s overreach and restore the constitutional authority of the states. And I once more remind all of the infinite wisdom of James Madison, who famously said “the powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite.”