The CFPB and Payday Lending: New Agency/Old Problem

Authors

  • LARRY KIRSCH,

  • ROBERT N. MAYER,

  • NORMAN I. SILBER


Abstract

The Dodd-Frank Act of 2010 brings nonbank payday lenders under federal regulation for the first time. The question of precisely how to regulate the payday loan industry creates a number of difficult challenges for the newly created Consumer Financial Protection Bureau (CFPB). Whereas most consumer advocates would prefer to ban or strictly limit high cost payday lending activity and address unfair/abusive lending practices, the CFPB must also be attentive to the impact of regulation on credit access for low-wage, credit-constrained payday borrowers. This article highlights the policy, legal, and institutional issues raised during the CFPB's decision-making process. The CFPB has the opportunity to dramatically shift the longstanding consumer protection paradigm in favor of real-world protection of vulnerable borrowers and, thereby, to realize the hopes of the activists who helped to bring the Bureau into existence.

Ancillary