Arkansas Attorney General Leslie Rutledge finally sat down with federal Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to discuss the Obama administration proposed new rules to protect consumers from quick, small-dollar payday loans.
“I appreciated the opportunity to meet with Director Cordray and discuss a number of important topics of concern to Arkansans,” Rutledge said in a statement provided Wednesday (June 8) to Talk Business & Politics. “I reiterated my request that Director Cordray hold a conference of states to discuss the proposed federal standards for credit lines, installment loans, deposit advances, automobile-title secured loans and payday loans.”
Rutledge continued: “I made clear that holding such a conference is the right thing to do anytime a federal rule is going to supplant the reasonable policy choices of either Arkansas or other states. Based on the meeting, I am optimistic that Director Cordray will meet with a group of Attorneys General soon to discuss the proposed federal standards.”
Rutledge’s opportunity to sit down with Cordray occurred ahead of all-day CFPB-sponsored meeting on Thursday that will be held at the downtown Little Rock Convention Center, where the federal watchdog agency is holding a consumer advisory board meeting.
Cordray and CFPB staff will attend tomorrow’s meeting, where the Obama administration’s chief consumer advocate will discuss an auto lending education initiative, customer protection trends and themes, and payday lending. Following the morning session, Cordray will hold a briefing on CFPB’s proposed payday lending regulations later that afternoon. That session will be followed by a 30-minute public forum where citizens and consumers attending the registered event can ask questions or make comments.
Hank Klein, a longtime payday loan industry critic and founder of Arkansans Against Abusive Payday Lending, plans to attend the all-day meeting and hopes to press Cordray to add provisions to the new proposed federal rules that will halt all small and high-cost loans made to borrowers who can afford to repay the loans.
Although Cordray meet with Rutledge and is said to have scheduled meetings with area lawmakers, banking and credit union officials and other groups, CFPB media office did not return calls seeking information about the director’s Little Rock schedule and availability.
Over the last several weeks, Rutledge has stepped up her criticism of CFPB after Cordray’s office failed to respond to her May 11 request to convene a conference of the states to discuss the framework and ideas contained in the proposed payday loan rules. Rutledge said the proposals contained in a March 26, 2015 outline of potential new federal standard for – and limitations on – credit lines, installment loans, deposit advances, automobile-title secured loans and payday loans was another case of the Obama administration imposing federal regulations over states’ own interests.
The consumer watchdog agency championed by President Barack Obama on Thursday (June 2) proposed new rules requiring lenders to take steps to make sure consumers have the ability to repay their payday loans by cutting off bank debit attempts that rack up fees. CFPB officials said the proposed protections would cover payday loans, auto title loans, deposit advance products, and certain high-cost installment and open-end loans. The CFPB is also launching an inquiry into other products and practices that may harm consumers facing cash shortfalls.
Among other things, the proposed rule would apply to certain short-term and longer-term credit products that are aimed at financially vulnerable consumers. In drafting the rules last year, the CFPB said it had serious concerns that risky lender practices in the payday, auto title, and payday installment markets are pushing borrowers into debt traps.
With its action last week, CFPB will seek input from a wide range of stakeholders by inviting the public to submit written comments on the proposed rule once it is published in the Federal Register, expected any day now. Comments on the proposal are due on Sept. 14, 2016 and will be weighed carefully before final regulations are issued, officials said.
While not offering details, Rutledge has said her office will review CFPB’s proposed rule from the CFPB and “evaluate the best course of action.”
In 2008, the Arkansas Supreme Court ruled that the Check Cashers Act violated the state constitution because it allowed payday lenders to charge exorbitant interest rates. The state’s constitution specifies that consumer loans, loans for personal use, cannot exceed 17% per year regardless of the discount rate.
Since that time, most payday loan operators have moved out of the state, including large national chains and publicly-traded companies like Advance America’s Cash Advance Centers, First America Cash Advance, Rushmore Loan Co. and Ace Cash Express.