The Cato Institute’s Thaya Brook Knight has ripped the Consumer Financial Protection Bureau apart for it’s attempts to regulate payday lending.
If the “power to tax involves the power to destroy,” the power to regulate must carry the same destructive force. Since these heavy underwriting rules would apply only to loans made at a certain interest rate, It is difficult to view the proposed rule as anything less than an attempt to cap interest rates on short term, small dollar lending at 36 percent. And this the CFPB may not do.
Nor is the CFPB authorized to ban payday lending altogether and yet the rule is likely to do just that. There have been previous attempts to cap such lending at 36 percent. And theresult was a significant decrease in the availability of short term, small value loans.
After the D.C. Circuit Court rejected the CFPB’s unconstitutional authority, calling the CFPB director the “single most powerful official in the entire United States Government, at least when measured in terms of unilateral power.” The court struck one more blow against the very flawed Dodd-Frank legislation. Knight remarks on the result of the case here:
To the extent it exists, the CFPB, as others have argued, should be turned into a commission with several commissioners, from different political parties, each bringing his or her own views and insights to the regulatory process. The CFPB’s funding should come through the appropriations process, which would impose a congressional check on its power, and not through a demand made of the Federal Reserve as is currently the case. While Judge Kavanaugh’s opinion makes no such sweeping changes, it moves the needle a little bit closer to accountability, due process, and constitutional soundness. For now, I’ll take it.