by Jeff Sovern
Last month, Interim Director Mulvaney announced that the Bureau may reconsider the Bureau's payday lending rule. But he can't just rescind it. That would require a full notice-and-comment rulemaking, and that would take longer than Mulvaney will be at the CFPB (under the Vacancies Act, he is limited to 210 days). True, Mulvaney could start that process and a successor could finish it. But even then, the Bureau would have to to meet the requirements of the APA and not appear to be acting arbitrarily and capriciously, which would be hard to do after it already promulgated a rule on the subject. But according to a Kate Berry article in the American Banker, Mulvaney can’t just kill CFPB payday rule, but here’s what he can do, Mulvaney could delay implementation of the existing rule and then a successor could amend the rule to make it less protective of consumers. One scenario would shift the rule from prohibiting a payday lender from making certain loans unless the lender verified that the consumer could repay the loan to a rule that obliged lenders to provide disclosures. The problem with that approach is that consumers all too often ignore disclosures, as Omri Ben-Shahar and Carl E. Schneider demonstrated in their book, More Than You Wanted to Know: The Failure of Mandated Disclosure. For example, a study by Marianne Bertrand and Adair Morse, both of Chicago's Booth School of Business, Information Disclosure, Cognitive Biases and Payday Borrowing and Payday Borrowing, that displayed the image below to payday borrowers, found that it reduced payday borrowing by 11% in later pay cycles and the amount borrowed by 23%. That doesn't seem like much when you look at some of the comparisons below, such as that a three-month credit card loan would cost $15, versus $270 for a payday loan. So the difference between regulation and disclosure for some–perhaps many–consumers is the difference between being caught in a debt trap, or not.
