The Consumer Financial Protection Bureau (CFPB) has only been operating for about five years. But don’t let that relatively short track record fool you; this is a governmental agency that is out to get results. As to whether those results are actually good for consumers, though, is up for serious debated. According to the CFPB, new regulations that they are pushing are all focused on helping to protect seemingly “helpless” American consumers from lenders that are out to get them. If we were crafting a dramatic story out of this whole ordeal, the main nemesis of the CFPB would be payday lending companies. However, the new rules that the CFPB is proposing would have a negative impact on payday lenders and other financial service providers that consumers depend on.
Yearly, a wide range of companies provide lines of credit for small dollar, short term loans that traditional banks don’t want to provide. These types of loans include payday advance loans, car title loans and installment loans. All lenders that provide these types of loans are in a very real danger of being shut down, and that means that millions of U.S. consumers will lose what little access they have to emergency lines of credit.
A lot of the businesses that provide these types of loans have been doing so for more than a hundred years here in the United States. These businesses have remained viable because they provide services that really help people. Every day, consumers use small dollar loans to deal with a wide array of expenses, some of which are definitely emergency expenses. These types of credit lines range from small loans people take out to get appliances/furniture, to emergency loans to pay rent payments or to cover vehicle repairs. If the CFPB gets its way, millions of Americans will find themselves out in the cold the next time they need new furniture, have to get their cars repaired to make it to work or even trying to make rent if they are in between paychecks at work.
Even though the folks in charge at the CFPB know that this is a very stark reality, they continue to move forward with their new regulations. This government agency is using the premise (one that is fool of holes) that these types of companies are predators that take advantage of people who cannot make their own financial decisions and who will never be able to pay back the money that they owe. In fact, the CFPB recently outlined their latest proposal, and estimated that the new rules could reduce the revenue of the small dollar lending industry by as much as 84 percent. And you don’t have to be a math genius or financial guru to know that an 84 percent decrease in revenue is the death knell for any type of business. Small lenders are understandably scrambling with these new changes looming on the horizon.
When did it happen that being a small business was a crime in this country? How did it come to be that companies who have been successfully providing financial lifelines to consumers for years have suddenly become the bad guys? The narrative that the Consumer Financial Protection Bureau is pushing (with plenty of support from the Obama administration, mind you) is one that simply has no basis in reality. Millions of people are unable to get financial services from traditional banks. If the CFPB is successful in its bid to effectively shut the doors of small dollar lenders, where are these financially at-risk consumers supposed to turn?