As the days tick by, the Senate’s window to repeal the Consumer Financial Protection Bureau’s (CFPB) rule restricting the payday lending industry has all but shut.
Although several Republicans oppose the rule and more than a month has passed since Sen. Lindsey Graham (R-S.C.) introduced a resolution to nullify its effects via the Congressional Review Act (CRA), industry insiders, such as Ballard Spahr Partner Alan Kaplinsky, have speculated as to a number of reasons why legislators will not act further to stop the rule’s implementation at this time.
“I think it is virtually certain that it would not generate sufficient votes in the Senate,” Kaplinsky told Dodd Frank Update.
He offered a comparison between the payday rule and regulations for which the Senate has demonstrated stronger motivation to seek repeal – namely the CFPB’s rule on forced arbitration and its guidance on auto financing, both of which have been nullified in the past several months.
“It is worth contrasting the payday rule with the Senate override of the arbitration rule and auto finance guidance,” Kaplinsky said. “First, only the payday lending industry is lobbying in favor of an override. That contrasts with the arbitration rule and payday guidance where the entire consumer financial services industry, including the banking industry, lobbied for the override. And the car dealers were also heavily involved in lobbying for the override of the auto finance guidance.”
For his second point, Kaplinsky noted that several states do not permit payday lending in the first place, making the matter a virtual non-issue for some legislators, particularly those concerned about protecting their seat.
“Why would a senator in one of those states vote for an override, particularly if he or she is running for re-election?” he asked, rhetorically.
Ballard Spahr has estimated that the Senate will have until May 17 to vote on Graham’s resolution, with that date marking the end of the 60 legislative days for such a vote under the CRA statute. Kaplinsky noted that does not give the Senate much time to act.
The lack of ardent supporters for the CRA measure means not a single Republican vote could be taken for granted in this case, making the absence of Sen. John McCain (R-Ariz.) as he copes with brain cancer particularly noticeable.
However, even if the rule is implemented, as seems to be in the cards, many senators likely believe it will look much different once litigators and CFPB acting director Mick Mulvaney are through with it.
Kaplinsly told us, as well as Bloomberg, that he thinks litigation or regulatory action could accomplish what the Senate may not, as far as weakening or eliminating the rule.
Mulvaney said in January that he intended to reconsider the rule, sparking a slew of criticism over his ties to the payday lending industry since, and the CFPB already faces one lawsuit over its effectiveness, initiated in April by the Community Financial Services Association of America, a payday lending industry group, and a Texas-based industry association.
All things considered, the question of whether or not payday lenders will find themselves feeling the full effects of one of the CFPB’s most controversial rules to date will remain up in the air unless the Senate decides to act, and soon.