The Consumer Financial Protection Bureau is receiving slack from U.S. payday lenders after a recent report concluded the industry "traps consumers in a cycle of debt," writes American Banker's Kevin Wack.
"Not only are the data demonstrably incomplete and misleading, but the conclusions, and specific language within the report seem aligned with the type of rhetoric that more often comes from advocacy groups that are not always driven by facts," the Consumer Financial Services Association of America, a trade group that represents payday lenders, wrote in a letter to CFPB Director Richard Cordray.
Many observers believe the CFPB, created under the Dodd-Frank reform law, poses a significant threat to the viability of the payday lending business.
The CFPB's report looked at payday loans and at high-cost, short-term loans offered, and concluded that from a consumer's perspective there is not a huge difference between the two products.
In their letter to the CFPB, the payday lenders defended their industry with a quote from former Rep. Barney Frank, D-Mass.
"Some adults will spend their money foolishly but it is not the purpose of the federal government to prevent them legally from doing it." Frank was quoted as saying as part of a 2010 legislative debate over a bill that would have licensed Internet gambling, but the payday lenders left out that context..
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