ARI SHAPIRO, HOST:
Payday lenders appear to have a sympathetic ear in an unexpected part of Washington, the acting head of the Consumer Financial Protection Bureau, Republican former Congressman Mick Mulvaney. He's holding up a rule that would have restricted payday lenders and their high interest rate loans. NPR's Chris Arnold reports.
CHRIS ARNOLD, BYLINE: Payday lenders say that if you need some money fast, they provide a valuable service. And that's how some customers feel, too, at the Advance America storefronts in a little strip mall in Pawtucket, R.I.
RAFAEL MERCEDES: My name's Rafael Mercedes. I work on cars for a living.
ARNOLD: Your name's Mercedes, and you work on cars.
ARNOLD: That's probably not the first time somebody's said that.
MERCEDES: No, it's not. It's hilarious.
ARNOLD: Mercedes said he came here for the first time when he needed some parts to fix his own car.
MERCEDES: My car broke down, and I needed money right then and there.
ARNOLD: He says he borrowed $450 and had to pay $45 in interest for the two-week loan. To get it, he left a check for the lender to cash the day that he got paid by his employer. That's why they're called payday loans. Now, a credit card, if you paid it back on time, wouldn't cost anything. But Mercedes says he has bad credit, and he doesn't use credit cards anymore because he had bigger debt problems when he did.
MERCEDES: I'd prefer not to get into that big mess again. People here are friendly, and I don't know. It just works for me.
ARNOLD: And if it means you can get your car fixed and get to work and not lose your job, what's the problem?
CHRISTOPHER PETERSON: The problem is that one payday loan often leads to another payday loan and so on into a debt trap.
ARNOLD: Christopher Peterson is a law professor at the University of Utah.
PETERSON: The average borrower is taking out eight of these loans per year, and that's the average borrower. Some are taking out 9, 10, 15 or more loans per year. These costs can really add up.
ARNOLD: Some people at the Advance America branch were clearly regular customers. Peterson says getting these loans paycheck after paycheck, you're paying an annual interest rate of around 300 percent. Sometimes it's even more. Peterson worked for the Defense Department helping to draft regulations which banned these high-interest payday loans for service members.
PETERSON: These loans have been found by Congress to be so dangerous that they have been prohibited for the military. And it was George W. Bush that signed that into law.
ARNOLD: The Consumer Financial Protection Bureau crafted its own payday rule for the rest of the country. It doesn't go as far as the military version, but it requires lenders to make sure that people can afford to pay the loans back. And it was just about to start getting phased into effect this month, but now...
MIKE CALHOUN: Now Trump's appointee to the consumer protection agency - he's put the rule on hold.
ARNOLD: Mike Calhoun is the president of the Center for Responsible Lending. Consumer watchdogs like him are upset that President Trump recently chose former Republican Congressman Mick Mulvaney to run the Consumer Bureau. As a congressman, Mulvaney proposed abolishing the bureau altogether, and he took campaign contributions from payday lenders. Now that he's running the bureau, he's put this rule on hold, saying it will be, quote, "reconsidered." And the CFPB has dropped an investigation into a lender who donated to Mulvaney's campaign.
CALHOUN: It is outrageous. Mulvaney is deep in the pocket of the payday lenders, and he's doing everything he can to help them.
ARNOLD: Mulvaney declined requests for an interview, but he's said in the past that he doesn't think campaign contributions present a conflict of interest for him. Payday lenders, as you might expect, are happy to see the rule put on hold. Jamie Fulmer is with Advance America. He says the rule would cut off loans for his customers who need them.
JAMIE FULMER: This is the classic example of, you know, somebody from Washington coming in and saying, hey, we're here to help, and we're here to tell you what's best for you and your family; and we're going to decide for you.
ARNOLD: Calhoun disputes that. He says, actually, lenders could still make up to six loans a year basically the same way that they do now. After that, the rule would kick in. But he's worried that with Mulvaney running the Consumer Bureau, the rule might never kick in at all. Chris Arnold, NPR News.
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