The Consumer Financial Protection Bureau (CFPB) seems poised to issue its final rule on short-term, small-dollar loans. The timing of this release is curious given widespread speculation that Director Richard Cordray will resign within days to run for governor of Ohio. Some sources have indicated that in order to expedite the rule's release before Cordray's departure, the CFPB will "bifurcate" the rule and only release regulations governing payday lending, not vehicle title or other installment loans.
If true, this would be inappropriate and highly objectionable, given that the Bureau never publicly contemplated a bifurcated rule, nor did they ask for public comments on such a rule. Further, the Bureau has made no attempt to research the effects of a rule that severely constricts one form of regulated consumer credit while leaving competing products unchanged.
The fact is, the Bureau has no data on the impact of a bifurcated rule. Will outcomes for consumers be better, or will they instead be driven to alternate forms of credit they have previously opted not to use? Or worse, will they be forced to turn to the large number of unregulated sources of short-term credit - like offshore internet loans - that the CFPB has never even considered trying to regulate?
Perhaps this should come as no surprise, given the Bureau has already ignored the input it received from small businesses under the SBREFA process, and has made clear it intends to disregard the vast majority of the millions of public comments it received from people who have experience using short-term loans.
The driving force behind this idea of bifurcation is equally troubling. According to mandatory disclosures of ex-parte meetings held by the Bureau, the Center for Responsible Lending's (CRL) Mike Calhoun urged the CFPB to bifurcate the rule if the Bureau could not issue a rule covering both short-term and longer-term loans before Cordray's departure. This advocacy by CRL occurred after the close of the public comment period - underscoring the influence and access of progressive activist groups on the CFPB's rulemaking. The Bureau has a long history of cozy ties with activist groups like CRL (whose parent company is a direct competitor of short-term lenders), many of whom are fiercely committed to eliminating the small-dollar lending industry and have had a heavy hand in directing the Bureau's rulemaking.
Over the next days and weeks we will gain a clearer and clearer picture of the facts. If the CFPB rushes to release its rule this week, if the rule they release regulates only a fraction of the products originally proposed, and if Director Cordray soon resigns and then announces his candidacy for governor, then there is simply no other explanation: The CFPB's effort to eliminate short-term credit for millions of Americans has been driven purely by partisan politics, personal ambition and ill-informed ideology.