Short Term Lending in California, what Has Changed Since President Trump was Elect

The Consumer Financial Protection Bureau (CFPB) has proposed a rule that put heavy requirements on short term lenders believing they are responsible for the many low income borrowers who have fallen into the debt trap. Payday loans lenders argued their existence is beneficial to people who have urgent financial needs. Before CFPB regulates the payday loan industry, the state of California has already put forward regulation by setting interest rate caps to prevent lenders from charging exorbitant interests on the customers.

The Operation Choke Point was recently launched to prevent banks from doing business with businesses with high money laundering risk like payday lenders. These regulations did not really pose any crisis to the payday loan industry and many of these lenders continue to operate up until the CFPB proposes the regulation. According to the report of the Center for Financial Services Innovation, the payday loans industry is declining with the payday loans volumes facing an 18% drop.

With the 18% drop in the payday loan volumes, the revenue from the payday loans have also dropped by 30%. Over 500 payday loan shops have been closed down last year. The closing down of the payday loan shops have also caused unemployment for many people. Trump’s administration is attempting to undo the new payday loan regulations established by the CFPB. One of the republicans, Hensarling has criticized the head of the CFPB, Richard Cordray as misusing his authority to restrict the access of consumers to funding from banks and other lenders.

CFPB is accused of violating the separation of power of the US Constitution and reducing the president’s authority. Many people have accused the CFPB of not offering adequate protection for consumers even though it seems to be helping consumers to recover their money. Despite that, President Trump has not made any attempt to fire him. Trump claimed that Dodd-Frank is leaving a negative impact on the economy and eliminating it can increase the economy growth by 4%. The pledge on eliminating parts of the law is to be a priority on Trump’s regulatory reform.

Dodd-Frank has make it hard for banks to grow and offers more financial products. Community banks are the ones that are most affected by the regulation. At least 25% of community banks have closed down because they are unable to keep up with the requirements of the regulation. Trump administration will target on the Volcker Rule which is preventing banks from earning enough profits. Rep. Several people can be of help in eliminating the CFPB’s regulation, for example Rep. Jeb Hensarling has proposed a bill to revoke the Volcker Rule. Ed Mierzwinski, the US Public Interest consumer director has also launched opposition against the Dodd-Frank’s payday loan regulation.