POLITICS

Payday Lenders Sure Have A Cozy Relationship With The Trump Administration

The Trump administration is helping payday lenders through weak law enforcement and deregulation.
“It’s disturbing to see the potential influence that predatory lenders may have,” said Lauren Saunders
“It’s disturbing to see the potential influence that predatory lenders may have,” said Lauren Saunders, associate director of the National Consumer Law Center.

A company that defrauded customers but only got a slap on the wrist from the Trump administration also made a large donation to the president’s 2017 inaugural committee.

Last month, Enova International, an online payday lender that operates the brands NetCredit and CashNetUSA, agreed to pay a $3 million fine for illegally taking money from customers’ bank accounts and failing to honor loan extensions. But the settlement included no refunds for the victims.

Enova gave $25,000 to Donald Trump’s presidential inaugural committee, an organization that prosecutors have been investigating reportedly because of possible money laundering, fraud and overpaying for event space at the Trump International Hotel.

Payday lenders as an industry donated more than $1 million to the inauguration, according to the liberal group Allied Progress, as well as tens of thousands to Trump’s  2020 re-election campaign. The Community Financial Services Association of America, a trade group for the industry, last year started holding its annual conferences at a Trump hotel in Florida

Last week, the Trump administration announced it would rescind parts of a new federal regulation that had been designed to rein in abusive lending practices that lead people to take out loan after loan and sink into debt. 

Favorable treatment for payday lenders is consistent with the Trump administration’s pro-business ideology, however, and there’s no indication that donations have directly led to favorable treatment. But the donations are not a coincidence, either.

Consumer advocates have complained that under Trump, the Consumer Financial Protection Bureau ― which was created during the Obama years in large part to go after payday lenders― has drastically scaled back its regulatory mission and been softer on bad actors.

The regulation that the CFPB said it would rescind last week would have required small-dollar lenders like CashNetUSA to make sure their customers can pay them back ― which would fundamentally disrupt the business model.

“With a couple of exceptions nearly every enforcement settlement that we see makes you scratch your head and say, ‘Why didn’t they pay more, why didn’t consumers get anything?’” said Lauren Saunders, associate director of the National Consumer Law Center.

As for the campaign contributions, Saunders said, “It’s disturbing to see the potential influence that predatory lenders may have.”

The bureau said Enova earned “millions” by illegally debiting customers’ accounts without authorization, in some cases sticking customers with bank fees. The company did not respond to a request for comment.

Congressional Democrats have questioned why Enova and two other companies that settled with the bureau this year ― including a jeweler and another payday lender ―  weren’t ordered to pay refunds to customers, saying the lack of payback “stands in stark contrast” to the bureau’s practice under previous leadership. In prior years the bureau secured $12 billion worth of consumer refunds. Democrats are seeking the organization’s communications with the three companies.

A spokesperson for the CFPB said the bureau doesn’t monitor political donations and that the people making decisions on the Enova case had no knowledge of the company’s donation before HuffPost asked about it.

The regulation that the CFPB said it would rescind last week would have required small-dollar lenders like CashNetUSA to make sure their customers can pay them back ― which would fundamentally disrupt the business model.

Payday lenders typically require borrowers to allow debits from their bank accounts or sign a postdated check, and their customers are often so strapped for cash that the first loan rolls over into a series of additional, costlier loans, according to CFPB research. While the product can be helpful for someone without access to regular credit, with hefty fees the loans essentially bear triple-digit interest rates that are outright illegal in a number of states.

In its financial disclosures, Enova said demand for its product is fueled in part by “stagnant to declining growth in the household income for working-class individuals.”

In 2017, Trump appointed his budget director, Mike Mulvaney, to also be the acting director of the consumer bureau, despite (or because of) the fact that Mulvaney opposed its creation in the first place. The former Republican congressman intervened in one investigation of a payday lender last year to drop charges that would have resulted in $8 million worth of restitution to the company’s customers, Reuters reported in June. The company, South Carolina-based Security Group Inc., was found to have harassed customers at their homes and jobs in an effort to collect debts. It agreed to pay a $5 million fine.

As a former congressman from South Carolina, Mulvaney ranked among the top recipients of campaign contributions from the payday lending industry. He has said that when he served in the House, he was more likely to listen to lobbyists if they contributed to his campaign. He proposed eliminating the consumer bureau and called it a sick joke. Mulvaney has since left the bureau to become Trump’s acting chief of staff.

As a recently as 2006, the payday industry’s political spending favored Democrats, but has since tilted heavily toward Republicans, according to the Center for Responsive Politics.

Payday lenders do anything and everything they can to prevent actions that cut into the debt trap that is the core of their business model,” said Diane Standaert of the Center for Responsible Lending.

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