Sunday , December 03, 2017 - 4:00 AM1 comment
“Follow the money.” These magic words will give you more political savvy than any others. Simply ask who financially benefits, and the heavy curtains of partisan politics pull back, revealing the wizard for who he really is, along with the lever-pulling lobbyists.
According to partisan rhetoric, a dangerous swamp lies behind that curtain. But the reality is more like the stock exchange trading floor, with every man and woman for themselves, snagging the best deal at the expense of others. As voters and citizens, our biggest problem is when we vote for someone, we must hold out the hope that, if elected, they will protect our financial interests. Unfortunately, this is wishful thinking. As we check our ballots, most of us are unaware of who financially benefit from our politicians’ actions and votes, or we don’t care.
I'd like to pose some questions: Who thinks payday lending is a good idea? Who thinks payday lending online by foreign corporations is a good idea? Do you think payday lending should be regulated and controlled to stop unfair and deceptive practices against vulnerable consumers? I’ve been involved, at least on the periphery, of payday lending law formation for years. You can’t be a consumer bankruptcy attorney and not see the devastation it can have on families and personal finances.
I watched money pour into a primary campaign to unseat Brad Daw, a Republican representative in Utah County who sought to tighten payday lending laws. He was challenged by his own party, and actually lost one primary election, only to come back after getting elected and make some improvements to these laws, benefitting everyone in Utah. The political influence of payday lending companies in Utah is strong. Utah’s Republican Party chairman from 2013 to 2017, James Evans, owns a payday loan franchise. Remember the three magic words and the first question? Pretty easy to answer, knowing what and who is behind that curtain. It's why every change in Utah’s payday lending laws has only come after long and difficult political battles.
If you read the news earlier this week, you saw the political drama unfolding at the Consumer Financial Protection Bureau. A heated dispute arose over who would be the acting head of the agency after the resignation of its first director, Richard Cordray. Cordray gave the reins to Leandra English as acting director of the CFPB when he resigned. In opposition to Cordray's choice, however, President Trump appointed Mick Mulvaney as acting director.
The dispute centers around two conflicting statutes: the Federal Vacancies Reform Act and the statutory provisions in the Dodd-Frank bill that create and govern the CFPB. The Federal Vacancies Reform Act outlines the president’s ability to appoint acting directors of governmental agencies, appointments which require Senate approval, under the Constitution. The statute gives the president the authority to appoint an acting director pending Senate approval, unless another statute expressly designates an officer to serve in the temporary capacity. The other statute says the deputy director will serve as the acting director if the director becomes unavailable until a new director is appointed by the Senate. The two statutes are in direct conflict.
In a federal court ruling earlier this week, the judge refused to block Trump’s appointment. Mulvaney is now the acting director of the CFPB. The judge chose to follow the Federal Vacancies Reform Act. An appeal is likely, although it could be irrelevant if Trump officially appoints someone to head the CFPB and the Senate confirms the appointment before the appellate courts rule.
Much of the press coverage this week was about the power scramble for the top of the CFPB, but very little attention was given to who benefits financially. So let’s follow the money.
The White House requested and received a memorandum from the Department of Justice outlining the primacy of the Federal Vacancies Reform Act supporting Mulvaney’s appointment. The memorandum was issued by Assistant Attorney General Steven A. Engel. Before joining the Trump administration, Engel practiced law privately and represented a Canadian payday lending company against the CFPB. As recently as August, Engel actively represented NDG Financial Corp. in a lawsuit with the CFPB in the state of New York.
Mulvaney implemented three things immediately upon his appointment: he issued a hiring freeze, froze new regulations, and halted all payments owed to consumers from the CFPB’s civil penalties fund. The civil penalty fund is there to reimburse consumers for unlawful financial activity that wasn’t otherwise recovered, similar to a crime victims reparation fund. So one thing is clear: immediately after Mulvaney's appointment, consumers were financially harmed. Regulations related to bank overdraft fees and improper debt collections were also halted by Mulvaney, protecting banks and debt collectors.
The one regulation that will not be impacted is the regulation on payday lending that requires payday lenders to ensure borrowers will actually have the ability to repay the loans. Another ensures lenders can't repeatedly attempt to withdraw money from borrowers' bank accounts.
In the Utah payday lending act, the ability of borrowers to repay was a hotly contested issue, but is now covered by the new federal rule. The rule was finalized shortly before Cordray’s resignation, so Mulvaney can’t freeze it. The rule becomes effective Jan. 16, 2018. Unless of course, Congress resorts as it has done often in the last year to the Congressional Review Act in order to repeal the rule.
Stay alert and follow the money.
E. Kent Winward is an Ogden attorney. Twitter: @KentWinward.
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