Consumer watchdog meeting with states on offshore lenders
WASHINGTON (Reuters) - The U.S. Consumer Financial Protection Bureau is working with the states to crack down on payday lenders that are located offshore and operating online, the agency's director Richard Cordray said on Tuesday.
Payday lenders are regulated differently in each state, with some states regulating the industry more loosely and others banning the practice outright.
Consumer advocates say some lenders, including those located outside the United States, are moving online to skirt the rules in states that are tougher on payday lending. Payday loans are high-interest, short-term loans, usually for small amounts, that are often used by low-income borrowers.
The consumer bureau, which has new federal authority over payday lenders, wants to make sure consumers can get emergency cash without being trapped by loans with extremely high fees that must be paid back quickly, Cordray said during a conference of the National Association of Attorneys General.
"We also recognize that effective enforcement of the law can be challenging when it comes to lenders that lack a physical presence," he said.
"Our enforcement teams have met with some of your offices in multi-state meetings to consider how best to coordinate our efforts on loans that involve off-shore or other jurisdictional issues."
The 2010 Dodd-Frank financial law created the consumer bureau and charged it with overseeing payday lending. Consumer groups say these loans can come with such high fees that borrowers must take out additional loans to pay them back, leading to a cycle of debt that is difficult to escape.
Cordray has said the bureau would keep an eye on short-term loans from payday lenders, credit unions, banks and other institutions.
But his comments on Tuesday appeared to go further, indicating that the bureau could work with states on enforcement against lenders who operate online and break state rules.
Cordray did not elaborate, and a CFPB spokeswoman declined to comment further. The watchdog did not specify the countries where the offshore lenders operate.
Critics of the bureau, including financial services industry representatives and congressional Republicans, say the CFPB's broad power to regulate a range of products could stifle Americans' access to credit.
Representative Jeb Hensarling, a Republican who leads the House of Representatives Financial Services Committee, on Tuesday called Cordray a "credit czar" and said the bureau is unaccountable to Congress.
"They have the ability to outlaw credit products that can help fulfill the American dream," Hensarling told a packed room at the Credit Union National Association's annual conference in Washington.
He also criticized President Barack Obama's controversial appointment of Cordray to lead the bureau, which was set up by Elizabeth Warren, now a Senator.
Senate Republicans refused to confirm a CFPB head until the White House agreed to let the bureau be run by a commission instead of a single director, so Obama used a procedural maneuver to install Cordray a year ago.
A court recently struck down similar "recess appointments" in a case that did not directly involve Cordray but that has led Republicans to question his authority to lead the CFPB.
"The type of sweeping authority that has been given to this unelected, unaccountable individual is mind-boggling," Hensarling said.
Democrats, including Massachusetts Senator Elizabeth Warren, who set up the agency after Dodd-Frank created it, have said the CFPB's current structure is working and allows it to work quickly on behalf of consumers.
Obama has since renominated Cordray to the post. A Senate aide said the Banking Committee is tentatively looking at the week of March 11 for a confirmation hearing with both Cordray and Mary Jo White, who has been nominated to head the Securities and Exchange Commission.
(Reporting By Emily Stephenson and Sarah N. Lynch; Editing by Nick Zieminski)
- Malaysia Airlines loses contact with plane carrying 239 people |
- Man called Bitcoin's father denies ties, leads LA car chase
- Ukraine standoff intensifies, Russia says sanctions will 'boomerang' |
- Florida mayor fights backyard gun ranges in 'Gunshine State'
- Apple loses bid for U.S. ban on Samsung smartphone sales