Explosive Internal Memo Alleges Trump Political Appointees Leaned In For Payday Lenders

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This piece is part of our weekly Prime series on corruption and the Trump Swamp, but it has been moved outside of the paywall while we cover COVID-19.

Federal judges don’t like it when federal agencies use “contrived,” after-the-fact justifications for whatever they wanted to do in the first place. Generally, the government needs a good reason to change existing rules.

Case in point: Commerce Secretary Wilbur Ross decided that he wanted a citizenship question on the Census. He told agency officials to come up with a justification for including the question — and they did. But under legal scrutiny, that reasoning was revealed as little more than an after-the-fact excuse. The citizenship question was then nixed.

And yet, “it looks like the administration has not learned,” the Georgetown administrative law professor David Super tweeted Wednesday.

He was referring to the explosive New York Times revelation of an internal Consumer Financial Protection Bureau memo about a payday loan regulation that Trump officials have long sought to gut.

The memo was authored by a staffer on his way out of the agency last year, Jonathan Lanning, and it is excruciatingly detailed and blunt.

At issue are the first ever national regulations of the payday loan industry, which traps many borrowers in a cycle of high interest rates and debt payments.

The rules, written during the Obama administration, established an “ability to pay” requirement — that is, a requirement that lenders ensure that borrowers will actually be able to repay their loan debt before taking out a loan in the first place.

The loan industry, of course, hates this rule. And so does the Trump administration. For years, they’ve delayed its implementation and worked to gut it. In a recent court filing, the administration said it would take final action on a replacement rule this month.

There had been an “apparent predetermination” by Trump’s political CFPB appointees to revoke the Obama rule, Lanning’s memo alleged. And staff were “openly rebuked” during a meeting for providing background on the Obama era regulation, accused of “defending the rule” that the Trump folks wanted to gut.

Lanning’s memo separately warned that these “conclusions based on presumptions” could reveal to a court “that the bureau assumed its answer.”

CFPB Director Kathy Kraninger, the memo alleged, attended “only one, short, largely non-substantive briefing” on the replacement rule before signing off on it. Scheduled for 45 minutes, the meeting “started a little late,” according to Lanning.

Perhaps the most explosive allegation in the memo, though, is that Trump appointees directed career officials to use shoddy math to justify revoking the Obama rule — contradicting the same bureau’s old research.

The old research found that the “ability to pay” rule would cut payday loan volume by 62 percent, as the Times noted.

But since the rule has never actually gone into effect, the CFPB ultimately asserted — allegedly under orders from political appointees — that revoking the rule would have “little effect.”

The administration has long showed a fondness for payday lenders. Mick Mulvaney, the former acting CFPB director (and ex-White House chief of staff), took lenders’ side in court against his own agency, and otherwise went easy on lenders he was supposed to be regulating, including former campaign donors of his.

Mulvaney’s former chief of staff became a lobbyist for the industry and, as the Washington Post reported in November, had easy access to his former boss after switching from “regulator” to “regulated.” In October, the Post obtained audio of an industry leader and major Trump donor bragging about his influence on the administration.

The CFPB didn’t have much of a response to the Times’ reporting. Bureau spokesperson Matt Leas touted the bureau’s “fair, transparent and thorough” approach to rule making and said, “the comments received and evidence obtained are all taken into consideration before issuing a final rule.”

“The director is the ultimate decision maker and ensures that the decisions taken are justified publicly, as is required by law,” Leas said.

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