The payday lending industry has taken the Consumer Financial Protection Bureau at its word from the beginning — that the bureau would fairly examine the industry and work with it as far as deciding whether additional rulemaking was necessary.
Although the rhetoric out of the bureau over the past three years has been even-handed, the industry privately expressed concern that the bureau would overreach and enact so many new regulations that it might kill the product.
Now, what might one expect of an Obama appointee? Given the culture of intimidation and Saul Alinsky-style demonization of opponents, the payday loan industry got exactly what it should have anticipated.
The release of the bureau’s White Paper on payday lending on April 23 is — and I say this having read hundreds of papers in my time — the most outrageously biased, consciously manipulated publication I have ever seen.
It’s essential to understand that the bureau spent months and months visiting every large payday lending firm in the country. It would set up in the company conference room for weeks at a time, and conduct “supervisory exams” in which every last detail of company operations and loan data were meticulously collected and studied. These exams were time-consuming, expensive and invasive. Nevertheless, the industry played fair. They were completely cooperative and transparent.
The next step should have been for both parties to sit down and talk about the observations. What does this mean? What does that mean? Can we discuss how best to interpret this data? Is this data and its conclusions supported by the enormous amount of third-party vendor data?
What they got in return was pure Alinsky.
The white paper literally cherry-picks data from these exams to press an obviously pre-determined conclusion — that payday loan usage by consumers is “sustained” and therefore “harmful” and therefore deserving of more regulation. This conclusion comes despite failing to provide any argument or proof that sustained use is actually harmful.
And that’s just the big conclusion. I do not jest when I say that every other conclusion is literally drawn out of thin air.
It has since come to my attention that the author of the paper was a bureau employee who had been hired from the Center for Responsible Lending — a mercenary activist organization that has repeatedly and publicly said it wants to kill payday lending. All of the author’s other papers do exactly the same thing — present data that is unrepresentative and draw conclusions that make no logical sense.
And yes, I will be publishing my own detailed critique of this paper in the near future.
I would argue that the CFPB has a place. There are aspects of the banking and credit card industry that need additional regulation that consumers can benefit from. Payday lending, however, has no such necessity. It is the most transparent and easy-to-understand financial services product in the country, which has been unfairly attacked by entities like the CRL for years.
Yet rather than honestly assess industry data, the CFPB immediately moved to mercilessly attack payday lending. The bureau has undermined its credibility and thrown out any pretense of treating this business fairly by publishing a paper that any graduate student would be ashamed to present. The CFPB must eliminate ideologues from its ranks, and that means Director Richard Cordray should be the first to go. He lied to the industry, he lied to the American people, and every financial services business should be concerned about his true motives.
It isn’t just payday lending companies under attack. The paper also took on banks that provide short-term credit. Products from Wells Fargo (WFC), Fifth Third (FITB), Regions Financial (RF) actually cost less than payday lenders, but that doesn’t matter to the CFPB. Personally, if I were Visa (V) or MasterCard (MA) or Discover (DFS), I’d be pooling my resources with the banks and payday lenders to litigate the heck out of the CFPB, before its too late.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at firstname.lastname@example.org and follow his tweets @ichabodscranium.
The opinions contained in this column are solely those of the writer.
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