CFPB Drops Investigation Against World Finance
A 2013 investigation into World Finance, a financial corporation founded in 1971 and headquartered in Coral Gables, Florida, discovered the subprime lender was charging annual interest rates to consumers sometimes exceeding 200 percent. The rates were being charged after the company lured customers into cycles of debt by convincing them to renew their loans over and over. The company had over 800,000 customers in its books that year.
In 2014, World Finance disclosed that it was under investigation by the Consumer Financial Protection Bureau (CFPB). The CFPB, created by Senator Elizabeth Warren, D-Mass., was put into place by the 2010 Dodd-Frank financial reform bill, and under the leadership of Richard Cordray, the agency took action against credit card lenders, mortgage servicers, payday lenders, and others for unfair lending practices.
Cordray left the CFPB last November and President Donald Trump placed Office of Management and Budget head Mick Mulvaney in the role of acting director of the bureau. Mulvaney has been a fairly open critic of the CFPB. In a 2014 interview, he said of the bureau, “some of us would like to get rid of it” and called it “a joke … in a sick, sad kind of way.”
In the past month, under Mulvaney’s direction, the CFPB announced it will “reconsider” its landmark rule on payday loans, which was issued last year and aimed to prevent borrowers from entering a vicious cycle of just paying the interest again and again on these loans because they could not afford to pay them off. The following day, the bureau announced it would be inviting comment on its structure “to suggest ways to improve outcomes for both consumers and covered entities.”
Now, the CFPB has dropped a lawsuit against a group of payday lenders that charged interest rates of nearly 950 percent. The companies were associated with a Native American tribe. And, the bureau sent a letter notifying World Finance that it was dropping its investigation.
Senator Warren said the recent actions taken by the bureau prove Mulvaney was making good on his earlier vows to bring it down. She stated of its decision to drop the World Finance cased, the “CFPB should protect consumers, not giant companies that use sky high interest rates to trap hundreds of thousands working Americans in debt. Dropping this case is more evidence that Mick Mulvaney is just using his time at CFPB to pay back the donors who funded his political career.” It’s no secret that World Finance contributed a total of $4,500 to Mulvaney when he was a congressman from South Carolina.
Mulvaney himself indicated he had “no intent in shutting down the Bureau.” He insisted the CFPB worked for all taxpayers and that includes “those who take loans, and those who make them” and “bringing the full weight of the federal government down on the necks of the people we serve should be something that we do only reluctantly.” Going forward, Mulvaney added, there would be “more formal rulemaking on which financial institutions can rely, and less regulation by enforcement.”