The head of the Consumer Financial Protection Bureau flatly rejected an effort Thursday by members of Florida’s congressional delegation and the state’s top financial regulator to have Florida’s payday-lending rules be used as a model for planned federal regulation.
According to people attending the meeting, speaking on condition of anonymity because the meeting was off the record, director Richard Cordray refused their appeal, saying he found fault with Florida’s law, in particular the number of loans borrowers can take out over a one-year period.
Before Thursday’s meeting, the CFPB hadn’t consulted with Florida’s leaders to discuss how their state regulation could be worked into the federal agency’s rule-making process and Florida members and regulators had sent multiple letters to Mr. Cordray asking that the CFPB consider their state law as a federal regulatory option.
In March, the CFPB proposed its own payday rules to end what it calls “payday debt traps” by limiting the interest rates payday lenders can charge, prohibiting borrowers from taking out more than one loan at a time, and by requiring lenders to assess the borrowers’ ability to pay.
It’s that last item that industry and regulators like Drew Breakspear, the commissioner of Florida’s Office of Financial Regulation and a participant at Thursday’s meeting, have argued will put most Florida storefront lenders out of business because the costs associated with such assessments would wipe out profit.
When pressed on this issue, Mr. Cordray said he’d take into consideration the concern, but didn’t seem overly moved by it, according to people who attended the meeting.
“We cannot comment on what the upcoming proposal will include,” said Jennifer Howard, a spokeswoman at the CFPB in an email responding to questions about the meeting. “In general, making sure that someone has the ability to repay a loan is common sense. In a healthy market, lenders benefit by extending loans that borrowers can afford, not by pushing borrowers into debt traps.”
The meeting follows the publication of a series of articles by The Washington Times highlighting the concerns of consumers, small businesses, payday operators and Florida officials over the CFPB’s proposed regulations.
Senior members of the delegation, Republican Vern Buchanan and Democrat Alcee Hastings, were present, along with Florida lawmakers on the House Financial Services Committee.
Joni Shockey, a spokeswoman for Rep. Dennis Ross, a Republican who sits on that panel, said the meeting allowed the Florida delegation to express concerns that paydays may be forced to shut down and leave residents without banking options for short-term cash.
“The meeting today was technically off-the-record, but Congressman Ross wanted to highlight the successes of the Florida model and the concerns being raised about CFPB proposed rules that could force payday lenders out of business,” she said. “The demand for short-term capital and loans will not disappear, but access to well-regulated products offered in the state of Florida might. This is a bipartisan issue for the Florida delegation.”
Some of the lawmakers who attended the meeting with Mr. Cordray are reportedly working on legislation to exempt Florida from any payday lending regulations enacted by the CFPB and use its model as baseline for a federal law pushed through by Congress.
The details of the bill are still fluid, but are expected to be announced in coming days.
Meanwhile, the CFPB is moving forward with a payday rule proposal, Ms. Howard said, denying that the panel was shutting out the state.
“The CFPB has met with a broad range of stakeholders as part of the process of considering payday rules,” said Ms. Howard said in her email response to The Washington Times. “We have conducted substantial outreach with lenders, consumer advocates, and state and local officials to get feedback on the Bureau’s outline of proposals.
“After the Bureau’s notice of proposed rulemaking is released, the Bureau looks forward to receiving comments from stakeholders about the proposals. We also have studied the impact of state payday regulations across the country. This analysis informs our ongoing rulemaking process,” she added.