The agency, now run by Office of Management and Budget Director Mick Mulvaney, is expected to take a much less aggressive approach to enforcement. The Bureau intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule.
Mick Mulvaney speaks during a news conference after his first day as acting director of the Consumer Financial Protection Bureau in Washington on November 27.
The regulator, which came under the control of Trump's budget director Mick Mulvaney in November, said it would be seeking comment on its "enforcement, supervision, rulemaking, market monitoring, and education activities". Former Director Richard Cordray, who resigned in November and is now running for governor of OH, criticized the decision on Twitter, calling it a "truly shameful action by the interim pseudo-leaders of the CFPB".
"Among other things, by imposing a "one size fits all" rule, the CFPB elected to ignore the innovative efforts by various states that have adopted effective solutions to payday lending concerns", said Joseph Lynyak III, a partner at the worldwide law firm Dorsey & Whitney.
Payday loans often run between $200 and $1,000, due when a borrower receives the next paycheck.
"The CFPB thoroughly and thoughtfully considered every aspect of this issue over the course of several years", Karl Frisch, executive director of progressive group Allied Progress, said in a statement.
The payday lending rule limits how often indebted consumers can obtain short-term loans and how much money they can borrow.
Cordray was the first full-time, Senate-confirmed director of the bureau, which was created through a Democratic bill after the financial crisis of 2007-2008. Republicans and many financial firms have complained that it has been too aggressive.
U.S. Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, called the move "unacceptable" in her own statement.
Critics of the payday loan industry had pushed for the rule, arguing that many consumers are approved for the small loans but are unable to repay them two weeks later, requiring them to take out a new loan with a new set of fees.
"While not ideal, the CFPB's final payday lending rule was a strong step toward helping struggling families avoid debt traps", said Christopher Peterson, a law professor and senior fellow at CFA. That would cut off an important source of cash for those in need, they say. Today's effective date also establishes April 16, 2018, as the deadline to submit an application for preliminary approval to become a registered information system ("RIS") under the Payday Rule.
Separately, some congressional Republicans are working to overturn the rule through the legislative process.
The Consumer Bankers Association, a trade group focused on retail banking, added a call for the consumer bureau to examine the use of bank-offered small-dollar lending.