The Consumer Financial Protection Bureau (CFPB) has been granted the official powers to act as a watchdog group over the landscape of consumer financial products. The CFPB also happens to have recently released a draft of new federal rules for the payday lending industry. Some opponents of short term lending have said that the new rules are a great start in helping to regulate (some might say over-regulate) the burgeoning consumer lending industry. In New York, though, some financial experts and consumer groups are warning people to take a stand to protect their already effective consumer protection laws.
Like New York, there are 13 others states along with Washington D.C. that have laws that cap the interest rates on payday loans. Opponents of payday lending in those states have said that the caps help to prevent payday lending companies from running profitable businesses. Regulators in New York have worked aggressively to stop payday lenders from getting around their laws. Some lending companies have opened operations on tribal lands, or via websites. So far, the regulators in New York have been successful in their bid to keep payday lending out of the state, for the most part.
Some payday loans do get made in the state, though. Being as some state leaders seem to detest the payday lending industry, though, these exceptions to the rule are being confronted regularly. Other states, like Missouri and Wisconsin, have more relaxed stances on payday lending. In some of these states there are more payday lending locations than there are McDonald’s or Starbucks locations.
The new rules that the CFPB has proposed are not supposed to preempt any existing state laws. However, there are some powerful groups of payday lenders that have made the argument for New York to roll back the state level regulations in order to be consistent with the current federal guidelines. Opponents of payday loans in New York believe that the new federal rules are not as effective as the protections already in place at the state level.
These payday lending opponents have started to rile their supporters to make the CFPB strengthen the proposed rules in order to give the state the ability to continue its tougher stance against the short term lending industry. In one example, it was said that the CFPB should make an effort to back up the stricter state laws by making an explicit statement that if lending companies try to get around these laws, those actions would be considered deceptive actions, and that offenders would be subject to sanctions at both the state and federal levels.
New York is pretty well known for toeing the line with regards to liberal agendas. It makes sense, then to the leftwing leaders in the state to put so much effort into imposing strict regulations on the payday lending industries. Those with a very left-leaning stance have gone on record over the years stating that payday loans exploit poor people, and that the lenders act as predators. Of course, not every New Yorker would agree with this mindset, but as it stands now, the more liberal voices seem to be on a mission to keep short term lending out of their state; by any means possible.
The CFPB has faced so much opposition over the past few years that the last thing they need is for their new federal payday lending rules to backfire in the state of New York. This may mean that the CFPB makes changes to their proposed rules to help placate states, like New York. If so, those who support the free market and the short term lending industry may be in for an even bigger fight than they bargained for.
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