Van Hollen, Brown, Colleagues Urge the CFPB to Halt Work on the Payday Rule and Restart the Rulemaking Process

U.S. Senators Chris Van Hollen (D-MD) and Sherrod Brown (D-OH), both members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, today joined 10 of their Senate colleagues in sending a letter to Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger urging her to immediately halt work on the Payday Rule. The Senators cited press reports that extensively detail improper interference and manipulation of the rulemaking process for the Payday Rule by political appointees at the Bureau. The Senators made clear that the CFPB must halt the rulemaking process immediately to restore the agency’s integrity and protect consumers from grievous harm.

“The memorandum provides details of a CFPB rulemaking process that, if true, flagrantly violates the Administrative Procedure Act’s requirements—in which political appointees exerted improper influence, manipulated or misinterpreted economic research, and overruled career staff to support a predetermined outcome,” wrote the Senators. “In light of these disturbing allegations, we urge you to halt work on the Payday Rule immediately and begin the rulemaking process anew.”

In addition to Senators Van Hollen and Brown, the letter was signed by Senators Elizabeth Warren (D-Mass), Doug Jones (D-Ala), Catherine Cortez Masto (D- Nev.), Tina Smith (D-Minn), Jack Reed (D-R.I.), Brian Schatz (D-Hawai'i), Jon Tester (D-Mont.), Robert Menendez (D-N.J.), Mark R. Warner (D-VA), and Richard J. Durbin (D-Ill.).

The full text of the letter can be found here and below.

Dear Director Kraninger: 

We write regarding the Consumer Financial Protection Bureau’s (CFPB or Bureau) Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule (Payday Rule). We are disturbed by recent press reports that extensively detail improper interference and manipulation of the rulemaking process for the Payday Rule by political appointees at the Bureau.[1] This may also explain why the Bureau has been pursuing a Payday Rule that would allow payday lenders to continue to issue loans that borrowers cannot repay and that would trap them in cycles of debt. Given these new revelations on top of the many pre-existing issues, we ask that you immediately halt work on the Payday Rule. 

The internal Bureau memorandum disclosed in press reports further suggests that from the outset of Mr. Mulvaney’s time at the CFPB, he and his political appointees were determined to repeal the existing Payday Rule (2017 Payday Rule).[2] One of Mr. Mulvaney’s first acts after becoming Acting Director was to announce that the Bureau would reconsider the 2017 Payday Rule.[3] Because of the memorandum, there is even more to suggest that he made this decision without any cost-benefit analysis, any briefing from career staff, or any new information that would justify the rule’s reconsideration.[4] The memorandum also brings to light potentially disturbing information that career staff were discouraged from offering any reasons or justifications that would not support Mr. Mulvaney’s decisions.[5]

The memorandum provides details of other instances in which political appointees worked to predetermine a course of action.[6] For example, at an industry conference, a senior political appointee apparently previewed information with payday lenders regarding “the Bureau’s general approach to revoke the [ability-to-repay] provisions”[7] before this information was made available to the public.  The memorandum indicates that this political operative shared this information on October 4, 2018—three weeks before the Bureau announced on October 26, 2018 that it was going to reconsider the 2017 Payday Rule’s ability-to-repay provisions.[8] If true, this would not only be improper, but contrary to what the Bureau was concurrently telling Congress that “no decision had been made” about the 2017 Payday Rule.[9] 

The memorandum also details the alleged persistent, repeated interference and attempts to manipulate or misinterpret research by political appointees to support their predetermined repeal outcome, including: 

• “attempted influence into how the staff’s [cost-benefit] economic analysis should be framed and presented,” but which “show[ed] some significant errors in economic reasoning”[10]; 
• “advocating for ignoring the majority of the available research, and handpicking studies that supported a specific conclusion, regardless of their vintage or quality”;[11]
• comments pushing career staff to “ignore numerous published estimates, its own internal analysis, and analyses that outside parties supplied during the 2017 Rule’s notice and comment period because an individual in the front office ‘doesn’t agree with them’”;[12] and
• political appointees’ repeated reliance on study findings that are contradicted by the underlying data or studies written by industry-funded researchers.[13]

When you became Director, you had the opportunity to reverse course and begin a new rulemaking consistent with the “robust use of cost benefit analysis” that you described at your confirmation hearing.[14] That did not occur. Your first and only briefing with career staff on the payday rulemakings was on January 15, 2019.[15] As the memorandum details, political interference in the rulemaking process apparently continued throughout your tenure.[16]

The memorandum provides details of a CFPB rulemaking process that, if true, flagrantly violates the Administrative Procedure Act’s requirements—in which political appointees exerted improper influence, manipulated or misinterpreted economic research, and overruled career staff to support a predetermined outcome. In light of these disturbing allegations, we urge you to halt work on the Payday Rule immediately and begin the rulemaking process anew. Your failure to do so not only calls into question the integrity of the rulemaking process, but could also result in grievous harm to consumers.