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Consumer Financial Protection Bureau Set to Close in on Online Lenders

For better or worse (better for conservatives, likely worse in the minds of his supporters) Obama’s time in office is coming to a close. Of course, this is not news, as the circus surrounding those who are running on both sides of the aisle has been on everyone’s radar as of late. But as Obama’s run comes to an end, whether you supported his administration or hated what he stood for, it is time for people to consider the legacy that the current president will leave behind. Of course, only time will truly tell how his run is remembered. In the meantime, though, we can all look at the “proof in the pudding” so to speak with regards to his economic legacy.

Obama began his first term at POTUS at a rough time for the American economy. Unfortunately, by supporting initiatives, like the creation of the Consumer Financial Protection Bureau, he never really took steps to help the country get through the Great Recession any faster. Instead, by throwing his support and clout behind the CFPB, he may very well have set up a political battle that will rage long after he has left office and starts enjoying the profitable life of giving public speeches and publishing more of his memoirs.

Case in point is the CFPB’s latest move. Reports coming out of Washington D.C. Have the bureau releasing new rules that will allow it to police online lenders the same way that it keeps tabs on big banks in the U.S. According to the Wall Street Journal, “The agency aims to unveil a proposal this fall to supervise the largest so-called installment lenders that essentially offer small-dollar loans with set payment periods as well as lenders who tie such loans to car titles. The CFPB is now considering broadening its definition of ‘installment’ lending to wrap in marketplace lenders, which operate online and offer similar types of small-dollar loans with set payments.”

This move would come on the heels of actions the CFPB took in March that allows consumers to file complaints about online lending companies online. This set off a lot of red flags for the industry, and may set a precedent for what we can expect going forward with new rules for the industry. The CFPB’s next moves would likely have them stepping into the fray to police non-bank online lending companies. These lenders are already subject to current consumer protection regulations, but they do not routinely submit to regulatory exams, like the big banks do.

In a published op-ed from earlier this year the CEO and President of ABA Rob Nichols stated, “

“For customers, a loan is a loan and a payment is a payment,” ABA President and CEO Rob Nichols stated, “The features may be the same regardless of whether the company has a charter or not, but the confusion about who regulates whom — and in what ways — is leading to gaps in consumer protection.”

It is clear that with the CFPB’s biggest supporter (Obama) leaving office soon that the CFPB is scrambling to do all they can to secure their role as the top financial regulation organization of the future. However, the bureau has been facing a lot of scrutiny in recent months. And with many top conservatives believing that power will shift very soon, there are things going on that may very well shake the foundation of the CFPB to the point of no return. The bureau is currently defending its constitutionality in a court case, facing new bills that would limit its budget and even its director – Richard Cordray – is on the hot seat with both Democrats and Republicans. As the elections get closer, expect to hear more about the future of this very controversial government watchdog group.

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