Last month, Politico reported that the recently proposed payday lending regulations by the Consumer Financial Protection Bureau had been written in close communication with a consumer advocate non-profit. Emails between the CFPB and the Center for Responsible Lending (CRL) show frequent contact and collaboration.
Emails obtained through the Freedom of Information Act show that CRL spent many hours consulting with the Obama administration and the CFPB on how best to write and implement a rule that would restrict the payday loan industry. CRL regularly sent over policy papers, traded emails and met multiple times with top officials responsible for drafting the rule. In November 2013, as it was researching regulations, the CFPB requested data from the nonprofit on payday lenders “to help focus these efforts.” The next month, CRL requested a copy of the agency’s overdraft analysis “so that CRL could make sure ours was as parallel as possible.” CRL officials met at least three times with CFPB Director Richard Cordray since 2012, according to his public calendar.
CRL’s influence at the consumer agency went beyond meetings and proposals. One of its executives left CRL in 2013 to join the CFPB as a program manager for payday and small-dollar loans. After two years in the job, she returned to the nonprofit. An assistant director of financial education at the CFPB also worked for Self Help Credit Union, which is affiliated with CRL.
Concurrent to the meetings with CRL, Self Help Credit Union was talking with CFPB officials about a new product it dubbed the “just right” loan, which is a small-dollar loan product with a much lower interest rate, as an alternative to payday loans. The credit union, which reported $25.8 million in profit last year and has 22 branches, exchanged emails in the fall of 2014 and later held a conference call with CFBP staffers to discuss their payday lending alternative.
Payday loans are a $46 billion industry that spends more than $3 million each year on lobbying in Washington. The CFPB was famously founded to counter such industry influence on consumer laws and regulations. In this case, it appears the lobbying cuts the other way. The cozy relationship between CFPB and CRL is of particular significance because it is expected to be a model for how the CFPB will draft future regulatory rules. A formal “notice of proposed rulemaking” on payday loans is expected from the bureau in the coming months.