Consumer Watchdog Under Attack

Will payday predators prevail against key regulator?

Andy Spears


Photo by Artur Tumasjan on Unsplash

The Consumer Financial Protection Bureau (CFPB) was designed to be an independent regulator protecting consumers in the financial marketplace.

This includes working to address issues around banking, credit, lending, and other key financial transactions.

The agency has been aggressive of late, taking strides to address issues around credit reporting, junk fees, overdraft fees, and deceptive marketing and lending practices.

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Now, the agency is coming under fire from the trade association that represents payday lenders.

Jason Mikula of Fintech Business Weekly reports that the 5th Circuit Court of Appeals ruled in favor of payday predators in a move that could significantly restrain the reach of the CFPB.

But now, the consumer protection agency faces a potentially catastrophic setback — not just on its forward-looking agenda, but on previous rules and enforcement actions.

The proximate cause? Last week’s ruling in the Fifth Circuit in Community Financial Services Association of America, Limited vs. Consumer Financial Protection Bureau. The CFSAA, a trade association representing payday lenders, filed suit seeking the reversal of the bureau’s “payday loan rule.”

While the CFSAA appeal made several arguments for why the rule should be reversed, the one the Fifth Circuit found convincing was the argument that the CFPB’s funding structure is unconstitutional.

Of course, the CFPB is likely to appeal the decision and the process could take some time to sort out, but as Mikula notes:

In the meantime, a cloud of uncertainty will hang over the bureau. That cloud is intensified by the fact that Fifth Circuit’s ruling invalidates the CFPB’s payday rule — a result…



Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .