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On Payday, and on Principle: Mick Mulvaney and the Bounds of Reasonable Debate in Consumer Financial Protection

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Ben Kaufman
2018

In the first half of 2018, amid a flurry of deregulatory action across financial markets, Consumer Financial Protection Bureau (CFPB) Acting Director Mick Mulvaney announced the reconsideration of newly adopted restrictions on payday loans alongside the sudden end of both lawsuits against and investigations into some of America’s largest payday lenders. The following paper evaluates the motivation, economic rationale, and context of Mulvaney’s actions. Payday loans are high-interest loans usually collateralized by a forward-dated check due on the borrower’s next payday. Academic sentiment concerning these loans is divided, with some positing that the product can be narrowly welfare promoting for the financially desperate, others maintaining that payday loans are simply a predatory debt trap, and both sides acknowledging a paucity of alternatives for those in financial despair. However, as I will argue, Mulvaney’s actions as Acting Director- especially those related to the enforcement of existing law pertaining to payday loans- fall outside the scope of what might be defended by those on either side of debate concerning the economics and policy choices surrounding payday lending. Instead, his actions make sense almost exclusively when viewed through the lens of Mulvaney’s stated distain for CFPB, his opposition to federal intervention in financial markets, and a desire to defend the payday industry at large. As I will discuss, this exists both aside from and in direct opposition to conservative ideals regarding regulation.

 

 

 

Keywords

CFPB, payday lending, Mick Mulvaney, consumer finance