The Implications of the Bureau of Consumer Financial Protection for Cash USA

On July 21st 2010 Obama signed the Dodd-Frank bill which proposed the creation of a new consumer financial protection agency which eventually was approved as the Bureau of Consumer Financial Protection (“BCFP”) to oversee and regulate virtually all forms of consumer credit including direct online payday lenders such as Cash USA.

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don't care about getting votes

Madison, WI (Vocus) September 15, 2010

On July 21st 2010 Obama signed the Dodd-Frank bill which proposed the creation of a new consumer financial protection agency which eventually was approved as the Bureau of Consumer Financial Protection (“BCFP”) to oversee and regulate virtually all forms of consumer credit including direct online payday lenders such as Cash USA.

Speculations on the actual effects of this new Bureau to the payday lending industry have been widely debated amongst many media outlets. Despite any inconsistencies in theories, the vast majority of writers seem to agree that the BCFP will certainly deliver a strong blow to the payday lending industry, which has already seen an increase in regulations over the past decade.

Recently, attorney Hilary B. Miller released an article to the payday loan industry blog, a payday loan industry news source, discussing the more realistic implications of this new Bureau and any new regulations for payday lenders.

Surprisingly, despite the media’s early celebration of the demise of the payday lending industry, Mr. Hilary B. Miller projects quite a different future along with his professional opinion and speculation as to why the BCFP may not be quite the threat to payday advance lending that everyone else is predicting.

For example, Mr. Miller makes the observation that, of the 848 page bill there is not a substantive regulation of payday loan and cash advance lending business. Although he does go on to mention “Title X” and the broad reaching power with regulates and enforces “covered persons”, which includes payday lenders. It seems that the real power of the BCRP may lie not only in the specific regulations, but also in the “vague” and vast power of Title X of the Dodd-Frank Bill.

Mr. Miller also surmises that Staff members may in fact be an integral part of the new BCFP, stating that their primary motivation is to “get it right” and that staff members are the “unsung heroes of Washington” whom also “understand science” and “don’t care about getting votes”. If Miller is correct, these objective staff members, who he predicts will make decisions based on science and unbiased research, as opposed to the popular Center for Responsible Lending reports that seemingly distort or leave out any facts that don not paint Lenders in a negative light.

If Mr. Miller is in fact correct, it would be a welcome change to payday lenders everywhere. To date, the majority of regulatory changes overseeing maximum APR’s and fees have been run similar to a “smear” campaign, often times distorting facts and figures. A common practice from opponents of payday lenders is to simply regurgitate the same arguments such as “payday lenders ‘target’ low income families” yet they never seem to acknowledge that like any other private business, or that by limiting APR’s to 36% lenders are only able to charge $1.38 for a $100 loan, thus making it impossible to stay in business.

Hopefully, for both the sake of consumer financial freedom of choice, and the freedom to operate small businesses within the reasonable regulations of the law, Mr. Miller’s predictions will hold true over the next year whilst the BCFP begins to grasp the reigns and oversee the vast financial landscape of America.

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