Payday Lenders Prepare for a Fight After Warren, Sanders Declare Presidential Bids

The payday lending lobby has largely stayed under the radar in previous election cycles as other hot-button issues like Wall Street regulation and tax policy took up voters’ attention. But with Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.), both advocates of consumer protections, officially running for president, the industry is gearing up for its first big political fight in the 2020 election cycle.

The Consumer Financial Protection Bureau announced on Feb. 6 its plan to gut a signature Obama-era payday lending rule that required lenders to confirm their borrowers can pay their loans on time and still cover basic living expenses. That move preceded Warren’s official kickoff of her presidential bid on Feb. 9, when she focused on income inequality and the middle class as themes for her campaign.

And Sanders is also running on a platform that champions the middle class, promises to address wealth inequality and focuses on financial institutions. In the past, Sanders has co-sponsored legislation, along with Warren, that targets payday lending practices.  

Previous polling suggests this kind of messaging could resonate with voters in 2020 because financial regulation and oversight of large banks has support among both Democratic and Republican voters. Scott Astrada, director of federal advocacy for the Center for Responsible Lending, which argues for payday lending regulations, said he expects payday lending rules and the CFPB to be a “flashpoint” in the 2020 presidential race.

Anticipating the increased scrutiny, the lending industry is preparing its own messaging -- that is, it’s providing a service to the working classes who need temporary help.

Dennis Shaul, the chief executive of the Community Financial Services Association of America, said in an emailed statement that the organization is lobbying policymakers and elected officials at the state and local level leading up to the election.  

He also contended that loans provided by payday lenders can be “the least expensive option for consumers, particularly compared to bank fees, including overdraft protection and bounced checks, or unregulated offshore interest loans and penalties for late bill payments.”

The Center for Responsible Lending and other payday lending regulation advocates said they are flooding the CFPB with letters and other documents during the comment period for the CFPB’s payday loan proposal, which ends May 15.

Astrada said the Center for Responsible Lending is also “taking an aggressive line” in looking to its Hill allies for oversight hearings that will bring attention to the CFPB and its new director, Kathy Kraninger.

“Until the rule is officially enacted or updated, there is primarily oversight authority through congressional hearings, requests from the chairwoman and a semiannual report to Congress that the director is required to do,” he said.  

Alan Kaplinsky, head of the consumer financial services practice at Ballard Spahr LLP, said the payday lending industry is betting that Warren and Sanders’ messaging around the issue won’t be a “slam-dunk political win.”

“A lot of consumers who rely on payday loans want to leave things as is; they like the current regulation,” he said.

While the success of either narrative is still up in the air, major candidates on the Democratic ticket such as Warren and Sanders are making protecting the middle class a central theme in their campaigns. Both have proposed popular taxes on the wealthy, and Warren has proposed using her wealth tax to fund a universal child care program that would benefit working parents.

For Warren’s campaign, the Massachusetts Democrat’s role as an architect of the CFPB demonstrates a history of reforming Washington regulations to help working Americans, said her director of communications, Kristen Orthman, in a statement to Morning Consult.

“She knows we need big structural changes in Washington to help working Americans, and she's shown she knows how to make that happen,” Orthman said.

Sanders’ campaign did not respond to a request for comment.