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Senate kicks off efforts to repeal consumer watchdog controls on payday lending

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Senate kicks off efforts to repeal consumer watchdog controls on payday lending

Sen. Lindsey Graham, R-S.C., introduced a measure March 22 that seeks to nullify the Consumer Financial Protection Bureau's rule requiring new protections on payday loans, auto title loans, deposit advance products and certain high-cost installment and open-end loans.

Graham is targeting the CFPB's rule, finalized in October 2017, that would require lenders to conduct a "full-payment test" and evaluate a borrower's ability to repay the lender on financial products that have gained a reputation for being high-cost and high-risk. The rule would also install caps on the amount of short-term loans that can be issued in succession.

The payday rule has been a contentious topic in the financial services industry, breaking the CFPB's record for submitted public comments at a count of 1.4 million.

The Congressional Review Act, or CRA, allows lawmakers to kill agency rulemaking if the president signs a joint "disapproval" resolution that requires a simple majority vote from both the House of Representatives and the Senate. In December 2017, Florida Republican Dennis Ross introduced a disapproval resolution in the House that currently has 36 co-sponsors, three of whom are Democrats.

Republicans have used the CRA to target a number of CFPB rules in the past, notably failing to repeal a rule on prepaid accounts in May 2017. In October 2017, Vice President Mike Pence helped the Senate break a tie vote to repeal a rule limiting the use of arbitration in consumer disputes with financial companies. Two Republicans broke with party lines to oppose the rule's repeal: John Kennedy of Louisiana and Graham.

The CRA has a 60-day legislative clock, after which Congress can no longer move to nullify the rule.

The CFPB, now under the leadership of Office of Management and Budget Director Mick Mulvaney, has already slowed the implementation of the rule. In January, Mulvaney pledged to internally revisit the payday rule, and in the interim delayed its effective date to August 2019.