21 July, 2010 – the President Obama enacted the Dodd-Frank bill under which a new financial agency of protecting consumers has to be established. The main functions of this agency are supervising and controlling all the types of consumer credit, and particularly online payday loan lenders, the striking example of which is Cash USA. The new financial agency was named the Bureau of Consumer Financial Protection, or briefly “BCFP”.
The establishment of the Bureau caused a wide reaction from American mass media and press. Everybody is making assumptions how the BCFP will effect payday lending business. Although there are a lot of various opinions on this issue, the most journalists share the opinion that the new agency will badly hit the payday lenders, who experienced a significant government regulation in the last 10 years.
Attorney Hilary B. Miller has lately written an article in blog of payday loan lenders, in which he tries to foresee which consequences the lending industry will face and which further legal acts, restraining lenders’ activities, will be implemented.
In spite of the fact that the most of mass media’s representatives are quite sure of the lowering of leading positions of payday lending sector, Mr. Miller holds another point of view and doesn’t hurry to bury the payday lenders because of establishing BCFP.
Although the Dodd-Frank Bill consists of 848 pages, it does not contain a real regulation of cash advance and loan lending industry in Mr. Miller’s opinion. On the other hand, he pays large attention to the “Title X”, which greatly regulates the activities of payday loan lenders. So Mr. Miller concludes that Title X has a bigger constraining influence on lenders that all the other specific regulations of the Bill.
Mr. Miller assumes that members of the BCFP are sensible and reasonable people. They are used to make decisions on the basis of science and conducted research, rather for their own interest and benefits. They are not interested in getting votes and hold the chief positions in the Government. If Mr. Miller is not mistaken about them, these Staff Members will resist the members of the Center for Responsible Lending reports, who only try to make up those ideas that describe payday loan lenders in a negative way.
If Attorney Miller is right in his statements, payday lenders may face favorable changes in future. Today almost all of the regulations concern the level of annual percentage rates and fees on payday loans. In establishing level of these indicators officials usually falsify actual data. In their statements they tend to repeat the same words, like payday lending companies are aimed at the families with low income. But they will never accept the fact that they are not right. If officials decrease percentage rates to 36%, they would force payday lenders to go out of the business.
If Mr. Miller’s arguments become a reality, it will be beneficial both to consumers of financial services, who will have freedom to choose and to payday lending businesses, that will have freedom of operation. As for now the BCFP is establishing and extending its rule over most of the financial sector of the USA.