After the Consumer Financial Protection Bureau (CFPB) announced its series of proposed rules for the payday loan industry, there was no shortage of reaction. Some say the new federal regulations are too timid, while others say the CFPB’s proposed guidelines go too far.
The response was mixed, but one public official was upset about the entire process, arguing that CFPB director Richard Cordray ignored the states and state officials from the very beginning.
One of these state officials is Arkansas Attorney General Leslie Rutledge. Immediately following the CFPB’s June 2 announcement, the Arkansas AG confirmed that she tried meeting with Cordray and encouraged him to establish a “conference of states” to garner state feedback.
Rutledge also outlined her concerns of the federal government intervening into a state issue.
“By disregarding my request and the concerns raised by many others at the state and federal levels about sweeping federal standards that would govern small dollar lending, Director Richard Cordray has made it clear that he is not interested in cooperative federalism,” said Rutledge said in a statement. “This one-size-fits-all federal approach from an unaccountable bureaucrat and agency ignores the interests of the states and will negate reasonable policies that already exist to protect consumers while at the same time allowing the free market to function properly.”
Her statement apparently garnered the attention of CFPB and Cordray. It was confirmed that Rutledge held a meeting with the CFPB director on Wednesday to discuss businesses that offer small loans for bad credit and how new rules at the federal level would affect high interest bearing businesses and state legislation.
The two officials met in Little Rock, where Rutledge reiterated her request for a conference of states. This conference would see state leaders and the CFPB talk about the federal regulations for payday loans and other financial products.
Arkansas, for instance, prohibits payday loans. Other states, meanwhile, have their own regulations for the payday loan industry. In recent months, some jurisdictions have either become more open to this niche and other states and municipalities are trying to rein them in or kick them out.
“I made clear that holding such a conference is the right thing to do anytime a federal rule is going to supplant the reasonable policy choices of either Arkansas or other states,” she said in a statement.
Rutledge added that she does think the CFPB will meet with Attorney Generals across the country.
CFPB’s Consumer Advisory Board is scheduled to hold an automobile lending education seminar and payday loan lending at Little Rock’s Statehouse Convention.
It’s unclear if the CFPB will take into account state concerns. The CFPB confirmed last week in Kansas City that it was holding a 90-day public consultation period. But experts say the CFPB will likely implement the new federal regulations for payday loans next year since they do not need approval from congress.
Proponents say that payday loans are necessary for impoverished consumers who do not have access to traditional forms of credit, especially when they’re facing pecuniary destitute. Critics present the case that payday loans help put consumers into dangerous situations by entering into a spiral of debt.
Since the launch of the CFPB, President Obama has encouraged the federal consumer watchdog agency to tackle payday loans and other financial products, such as auto-title loans.