A payday lender is accused of stealing millions from customers. Trump’s CFPB is now letting them off the hook.

The Consumer Financial Protection Bureau (CFPB) is taking it easy on payday lenders accused of preying on low-income workers.

In the agency’s first report to Congress since Mick Mulvaney took the helm in November, the CFPB said it is dropping sanctions against NDG Financial Corp, a group of 21 businesses that the agency, under President Obama, had accused of running “a cross-border online payday lending scheme” in Canada and the United States.

“The scheme primarily involved making loans to U.S. consumers in violation of state usury laws and then using unfair, deceptive, and abusive practices to collect on the loans and profit from the revenues,” the CFPB lawyers argued in the complaint filed in the Southern District of New York in 2015.

The CFPB’s lawsuit had been winding its way through the courts until Mulvaney took over the bureau. One of the lead attorneys defending the payday lenders was Steven Engel, who is now assistant attorney general at the US Justice Department, and who was listed as an active attorney in the case until November 14, the day after he was sworn into office.

In February, the agency dismissed charges against six defendants in the case, according to federal court records. The reason for the dismissal was not explained in the court motion, and the CFPB declined to answer Vox’s questions about the case.

Now the CFPB is “terminating sanctions” against the remaining defendants, according to the agency’s latest report to Congress. A federal judge had sanctioned the uncooperative defendants in March by entering a default judgment against them, which held them liable for the charges of unfair and deceptive business practices. The next step was to figure out how much they would pay in damages to consumers and attorney’s fees — a step that the CFPB suggests it won’t be taking anymore.

The CFPB’s dismantling of the case against NDG is the latest example of the bureau backing off of payday loan companies accused of defrauding consumers — an industry that donated more than $60,000 to Mulvaney’s past congressional campaigns.

The industry also appears to be currying favor with the Trump administration another way: This week, the Community Financial Services Association of America, which represents payday lenders, is holding its annual conference at Trump National Doral near Miami — a gathering that has been greeted by protesters.

A new day for payday lenders

In January, the CFPB dropped another lawsuit against four online payday lenders that allegedly stole millions of dollars from consumers’ bank accounts to pay debts they didn’t owe. A different payday lender, World Acceptance Group (a past donor to Mulvaney’s campaigns), announced that month that the CFPB had dropped its probe of the South Carolina company.

In March, a Reuters investigation found that the agency had also dropped a lawsuit lawyers were preparing to file against another payday lender, called National Credit Adjusters, and that Mulvaney was weighing the possibility of halting lawsuits against three others. Those cases sought to return $60 million to consumers for alleged abusive business practices.

The agency has not explained why the cases were dropped. And Mulvaney was candid with members of Congress about the bureau’s new approach to protecting consumers. “The bureau practice of regulation by enforcement has ceased,” he told members of the House Financial Services Committee on April 11.

Indeed, the CFPB has taken only one new enforcement action against financial companies since Mulvaney took over, a massive fine against Wells Fargo announced Friday. But it has gone even further to help payday loan businesses — dismissing cases and investigations that were already underway, for no stated reason.

Payday loans are terrible for consumers

The Consumer Financial Protection Bureau was created as part of the Dodd-Frank Act of 2010, which sought to regulate banks and lenders in the wake of the financial crisis. One of the main reasons for creating the quasi-independent agency was to protect consumers in the financial sector, particularly those consumers seeking mortgages, student loans, and credit cards. The CFPB regulates the financial arena in other ways — for instance, to make sure lenders aren’t discriminating against certain customers (a mission that is also being rolled back).

Payday loans have long been one of the sketchiest financial products available to consumers. These short-term loans are typically offered to low-income workers who don’t have credit or have bad credit. They are essentially a paycheck advance when someone needs cash to pay a bill.

But the fees are astronomical. For example, most payday loans charge a percentage or dollar amount for every $100 borrowed. According to the CFPB, $15 for every $100 is common, and amounts to a 391 annual percentage rate (APR) for a two-week loan. But the way they trap consumers in a cycle of debt is through their access to the customer’s bank account, either through a check or ACH transfer.

On the worker’s payday, they cash the check for the full amount of the loan and fees. That means the worker has even less money to pay bills for next month, according to the Center for Responsible Lending.

[Payday lenders] take the money out regardless of whether there is enough money in the account to cover living expenses. Sometimes this leads to overdrafts or insufficient funds fees. Sometimes it compels the customer to take another loan to cover living expenses.

The CFPB estimates that 12 million Americans used payday loans in 2013, which includes traditional storefront locations and online payday lenders. That year, about 90 percent of all loan fees came from consumers who borrowed seven or more times, according to the agency, and 75 percent were from consumers who borrowed 10 or more times.

Those numbers show how dependent payday lenders are on keeping customers trapped in debt and unable to pay their bills.

This business model has sparked so much controversy that at least 15 states and the District of Columbia have banned payday lending. And the Pentagon considered these loans so harmful to military service members that Congress banned businesses from providing them to military personnel back in 2006.

Now, under Mulvaney’s leadership, the CFPB is letting payday lenders continue these practices, much to the aggravation of consumer advocates. The head of the Center for Responsible Lending slammed Mulvaney after news broke that he was dropping the lawsuit against National Credit Adjusters and three other payday lenders.

“Mick Mulvaney is letting predatory payday lenders off the hook while they rip off American consumers,” Diane Standaert, executive vice president for the consumer watchdog group, said in a statement. “The companies...have a well-documented history of causing borrowers financial devastation. If they have committed illegal actions, they should be held accountable.”

Mulvaney plans to ease rules for payday companies

Before Richard Cordray stepped down as director of the CFPB, the agency had just finalized a rule to prevent payday lenders from giving money to people who can’t repay the loans.

The regulation, known as the Payday, Vehicle Title, and Certain High-Cost Installment, requires lenders to check whether a borrower can repay the loan before making it. The agency argued that the rule would still give consumers access to short-term loans because they could still take out six payday loans per year regardless of their ability to pay back the money. Lenders would only need to verify a customer’s likelihood to repay the debt when they take out a seventh loan or more.

In January, the CFPB released a statement saying that it plans to reconsider the rule, which is set to go into effect in August. Mulvaney said during congressional testimony that the wanted to “reconsider elements that may create unnecessary burden or restrict consumer choice.”

Payday lenders have been pushing back against the rule, and on Monday, they filed a lawsuit to block it before it goes into effect.

Community Financial Services Association of America, the largest trade group for payday lenders, says the rule would “virtually eliminate” their business model, which provides short-term loans to millions of low-income consumers who lack access to credit cards or bank loans. The Consumer Service Alliance of Texas joined the trade group in the lawsuit filed in a federal district court in Austin.

In all, 2018 is turning out to be a good year for payday lenders.