Cc:

Document ID : 0 . 7 . 4373.5379

From : Lanning, Jonathan (CFPB)

< cfpbexclourexchange administrative group

(fydibohf23spdlt) / cn = recipients/ cn= jonathan.lanning>To: Singer, Susan (CFPB)

< lo cfpbexclourexchangeadministrative group

( fydibohf23spdlt)/cn =recipients/cn = singer, susanc3a > ;Silberman, David (CFPB) </ cfpbexclourexchangeadministrative

group (fydibohf23spdlt)/ cn = recipients/ cn = david silberman > ;Rothstein, Paul(CFPB) < / o = cfpbexclourexchangeadministrativegroup ( fydibohf23spdlt) / cn = recipients/ cn =paul.rothstein

McGill, Yolanda (CFPB)

</ administrative group

(fydibohf23spdlt)/cn = recipients/ cn = yolanda.mcgill>

Morelli, Mark (CFPB )

< / = cfpbexc ou administrative group

( fydibohf23spdlt) /cn =recipients/cn=mark.morelli>; Gibbs,Christa (CFPB ) </ o = cfpbexclourexchangeadministrative group

( fydibohf23spdlt) /cn = recipients/ cn gibbs, ; Romeo,

Charles (CFPB) < / o = cfpbexclourexchangeadministrativegroup(fydibohf23spdlt)/cn =recipients/ cn = charles. romeo > ; Andreassen,

Kristine (CFPB) < / o cfpbexcou administrative group

( fydibohf23spdlt /cn =recipients/cn = kristine. andreassen ; Udis,

Laura (CFPB) < /o = administrative group( fydibohf23spdlt)/cn = recipients/ cn = laura udis> ; Lee, Lawrence

(CFPB) < /o = cfpbexclourexchangeadministrative group

( fydibohf23spdlt ) /cn = recipients / cn = lawrence .lee >

Subject: RE Payday reconsideration process concerns memoDate : FriAug 09 2019 14: 05 : 11EDTAttachments: Overview _ of_ Payday2. _ Process _ 07 - 30 - 2019 _ complete_ w _ commentary. docx

Bcc

Susan, David, Paul, and Yolanda,

The attached version has commentary inbubbles that providesmore.. . color. " wanted you all to havethis so as to nothave to readbetween the lines in the other versions. But figured this was better sent

for less public consumption. . .

Thanks!

Jon

Jonathan Lanning

Economist of Research

Office: (202) -9757 | Mobile: b )

Consumer Financial Protection Bureau

consumerfinance.gov

Confidentiality Notice: If you received this emailby mistake, you should notify the sender of themistake

and delete the e -mail and any attachments. An inadvertentdisclosure is not intended to waive any

privileges.

From : Lanning, Jonathan (CFPB)

Sent: Friday, August09, 2019 2: 02 PMTo: Singer, Susan (CFPB) < Susan. cfpb. gov > ; Silberman, David (CFPB) <David.

Silberman @ cfpb . gov> ; Rothstein, Paul(CFPB) <Paul. Rothstein @ cfpb . gov >; Sokolov, Dan (CFPB)< Dan. @ cfpb. gov>

Cc: McGill, Yolanda (CFPB) < Yolanda. @ cfpb. gov> ; Andreassen, Kristine (CFPB) <Kristine.

Andreassen @ cfpb .gov> ; Lee, Lawrence (CFPB) <Lawrence. . gov > ; Udis, Laura (CFPB )

<Laura cfpb. gov> ; Gibbs, Christa (CFPB) < Christa.Gibbs @ . gov> ; Romeo, Charles (CFPB)<Charles. cfpb.gov>

Subject: Payday reconsiderationprocess concernsmemo

Hello

) 5 )

In addition to OR and RMR leadership , I am copying the primary personnelfrom Regs, Markets,and OR who are continuing on thepayday work . I suspect it willbe usefulto share these with the future

AD . I have not copied Tom atthis point, as this was intended to be a memo to career staff, though I am

quite happy ifyou want to share this with him .

Please letmeknow ifyou haveany questions.

Thanks,

Jon

Jonathan Lanning

Economist OfficeofResearch

Office : 202) 435 -9757 Mobile :

Consumer FinancialProtectionBureau

consumerfinance.gov

Confidentiality Notice: Ifyoureceived this emailby mistake, you should notify the sender of the mistakeand delete the e -mail and any attachments . An inadvertent disclosure is not intended to waive any

privileges.

Summary of Primary Concerns

Apparent predetermination by the front office on the course of action for the NPRMs andhostility to2017 Rule,without (or at least prior to ) understanding the market

No consultation with staff before decision on limited course ofaction (i. . revoke, revoke withdisclosurereplacement).

Staffwas openly rebukedfor providingbackgroundon the 2017 rule during initialbriefing; toldwriting down themotivations, evidence, etc. was" defendingtherule, " rather thanbriefing ontherule.No direct communication/ discussionsbetween staff andFO.

Possibilityofdiscussionsbetweenfrontofficepersonneland individual(s) who receivedcompensation and acted in coordinationwith an industry group responsible for

funding/ conducting/ editing questionableresearchwhile the rulewriting processwas ongoing.

Only one , short, largelynon-substantivebriefingwith DirectorKraningerpriorto hersigning off

on both NPRMsand theFinalDelayRule. This seemsto haveplaced her in an unenviablesituation ofhavingsigned off on proposalsand a rule shemaynot havebeen given the

opportunityto fully understand.

Commented U 1 the exceptionofcertain highprofile folks ( Directors) I use initials to identifypeople. Thisis so that, if the edited documentwere to leak , there wouldbe someslightdifficulty in identifyingpeople. For thesakeof clarity in reading this document, the list ofpeoplereferencedis

Instances showing a lack ofrespect for / acknowledgement of/ listening to staff experts :

Lack of appreciation of efforts to make 1022 rigorous and evidence-based(asopposed tophilosophical);strongaccusationsofbiasleveledagainstOR bymembersof the FO ;demonstrablyfalse assertionsbymembersof the FO that OR relied on behavioralassumptions;etc.

Pressure to use a baselineOR deemed inaccurate and inappropriate and a generallack of

appreciation of staffexpertise (see court case citing"no effect" baseline as justification foroverturning rule, e-mail, etc.).

No apparentdefense of OR andits experts/ expertise/analysisbyPAD to FO; too muchwantingto take sides” when thesidesdid notcome close to equal reasoning/ evidence/ etc.Seemed that staffwere treated as "adversaries" rather than partnersbyboth PAD and ( .

asked to justify, ratherthan explain ,decisionswellwithin what should be our purview liketheinclusion / exclusionof specificpapers)

A W . = AnthonyWelcherB . J . Brian JohnsonC . M . Chris MufarrigeD . S. David Silberman

J .L . Jon LanningLL LarryLeeMark M . MarkMorelli(usefirst nameto distinguish fromMickMulvaneyP .R . RothsteinR .B BorzekowskiTP

Y . M . McGill

Instances showing a lack ofcare and concern for evidence and best practices for evidence -based

analysis :

Fundamental misunderstandings ofwhat constitutes research , evidence, rigorous analysis, etc .

E.g placing greater weight on articles' rhetoric than data ,when the former wasnot justified by

the latter (dangerous examples include: Priestly, Fusaro,Mann, etc . ); arguing for

inclusion/ exclusion of papersbased on optics than applicability /rigor; advocating for

selective ,out of context quoting of papers to support a narrative (e.g. Skiba op-ed);belief that

funding/writing /editing of papers by industryadvocates is "no big deal .

Repeated and inappropriate assertion thatOR used a "lower standard 1022 evidence

relative to preamble ,when the 1022standard is dispassionately considering allrelevant

evidence meetingbasic standards of scientific rigor as determined by professional, Ph. D. level

social scientists, rather than the selective curation and presentation of evidence to fit a

narrative that seemsto constitute the preamble' s " higher standard. "

Mischaracterizations ormisleading statements made publically by the Bureau Officials about the

NPRMs

Publicmischaracterizationofthe 1022 findingsby " Bureau Officials" indicate that they maynothave understood someof thebasics of OR' s analysis. These statements could potentiallybe

used to argue that the Bureau did not consider the evidence/ analysesclosely prior to signingoffon theproposal.

Repeated assertion, over OR s objections, that findingswere "notreliable rather than" insufficient" or " notgeneralizable") when there wasno reason to question the reliability of thefindings

Public statementthatthe bureau did notdiscuss its proposal to rescind the rule with industryofficialsbefore announcingthe proposals, despite EA s PAD possibly discussingtheprocess at an

industry conference, and a " Bureau official discussionswith an academicwho receivedcompensation from , and performed work for, an industry trade group' s research arm .

Commented ( wehave a sense ofwhere the

payday- specific issue he has comefrom ? Itseems like a

really personal issue for him .

Commented ( U : Notsure this is the rightmedium for

this discussion , but itseems like it should be noted.

Significant time an effortspent dealing with an economic adviser to the front office and his comments

which consistently show a tenuous, often flawed grasp of economics :

Ultimately, C. M . practices economicsas a philosophy, rather than a social science,which places

him outside theorthodoxy , and introduces significant potential risk to the analyses to which he

contributes

is consistent with the type of philosophical economics that largely fell out of favor

in the 1960s

Numerous instanceswhere C. . attempts to selectively cite evidence and apply logical

reasoning without an accounting of the underlying assumptions to advocate for

conclusionsbased on presumptions.

This would resultin an obviouscircularity ofreasoningthatcould revealto a

courtthattheBureauassumeditsanswer.

Orthodoxeconomicstrainsits practitionersto exploredata andmarketsto testtheir

assumptions, not justify them , and to determine conclusions based on evidence , rather

than ideologySeemyriad commentsby C.M . displaying economicanalysis” or reasoning, including:

Equatingquantity suppliedwith supply (multipletimes);

falsehoods that actuallyhurt his case, then arguing they do not industryestimates did notmodelprincipal step -down loans when, if they hadn' t their estimates

would suggestwewildly overestimated the contraction) ;Citing outof context sentences from articles that find the opposite ofthe conclusion he

asserts (Skiba op -ed, Priestly).

Numerousattackson theBureau's simulationsof paydaycontraction, which show a clear

misunderstandingofwhat the simulationsactuallydid.

Numerous e-mails from OR staff explaining this to him .

o Outside validation of OR's resultsbyat least three industry estimates, andadditional

empiricalvalidationby a lendervoluntarily employingATR underwriting.

devotedhoursofresourcesto walk C. . through thedata and simulations; it

becameclear C. . was incapable of accessing the data or usingstatisticalprogramsthatare commonly used by anyone trained in empiricaleconomics, including all of OR'

C . M . regularlyasserted the legalreasoningin the preamble should influence thefindingsof fact in the 1022; that the simulationsrelied on structuralestimation resultsdespitenumerousremindersthis wasnot the case;misunderstandingofthe differencebetween

the quantity ofpayday loanssupplied andthe supply of payday loans. Each oftheseshows amisunderstanding ofhow economicsas a dispassionate, rigorous, evidence

based social science worksin practice.

Dramatically inconsistent and contradictory assertions in an attempt to justify a desired

conclusion

. "default costs are high" in orderto justify rollovers then , literally sentences later,

"default costs are low " to justify no harm in defaulting

Asserts WARP arguments, then advocates for static, one-period approach that would

not allow for the evaluation ofWARP assumption (which isonly testable acrossmultiple

periods).

Only seemsconsistentwith tryingto prove perfectly-informedrationalitybyassuming

perfectly -informed rationality, rather than testing that assumption.

Would immediately revealthe flawednature ofanalysisto a potentialcourt, potentially

resulting in a finding of inadequate analysis .

Even if the comments were insightful, helpful, or accurate , the repeated reviews and suggested

edits at (and sometimes beyond )the eleventh hourwere incredibly time- consuming, and a

clearly inefficient use ofOR s already limited time and effort.

TimelineofKeyDates with References to SupportingDocumentation1

Commented ( Currently there' s a bit of

" commentary" in thenotes, as opposed to just describing

content. Commentary" passages (as see them ) are

highlighted.

Could go one of at least twowaysaswemoveforward :

1) Add morecommentary, eitherin thebullets , or incomments

2 ) Pullallcommentary from the timeline, and instead drafta narrative that cites this timeline, but providesmore

color/context

12 / 13 / 2017 : InformationMemoto Acting DirectorMulvaneyProviding High-LevelOverview of

the 2017 Rule and its

Summarizes the 2017 Rule ' s 1022 analysis and findings .

01/ 16 /2018 : The Acting Director Mulvaney Issues a Statement Indicating Intent to Reconsider

the 2017 Rule

Specifically , " The Bureau intendsto engage in a rulemaking process so that the Bureau

may reconsider the Payday Rule."

04 / 26/ 2018: E-mail from J. . Mark M .Regarding Payday for Acting Director Mulvaney

no benefit-cost analyses done in support of decision to reconsider , but that a

memo(and briefing? ) was provided on the existingbenefit- cost analysisfor the 2017

Final Rule.

01/ 2018 : E-mail from Mark M . on Payday for Acting Director Muivaney

Notes The Bureau did notundertake any additional cost -benefit analysis before issuing

a statement the Bureau may reconsider the Payday Rule. "

05 / 10 / 2018 : Payday Scoping Meeting (see Contemporaneous Notes )

were told Acting Director Mulvaney was considering two options (" full repeal and

" disclosure (only)" ), based on Federalism-like concerns.

05 / 30 /2018: Outlineof PotentialReconsiderationOptions

revocation and disclosure only options .

the FO' s request , directed to consider these and only these ) options.Path ultimately selected is basically described in . . .

05 /31/2018: E-mail from D . . about the 05 / 30 outline

decision to revoke orreplace with disclosure hasbeen made, and it would not

beproductive to offer reasons/justifications thatwould notsupport decision.

" the decision wasmade without any requestto the Associate Director or staff

for an analysis of the evidentiary and legalbases for the rule ."

06 /01/2018 : E -mail from M replying to an e-mail from J.L .

J. e mailhighlights issues with disclosures in particular, and reconsideration of

evidence in general.

. response describes the legal issues.

06 / 06 / 2018 :Meeting with T. P. (see ContemporaneousNotes)

T P 's fundamental question : "Would different framing of problem change the

outcome /analysis /results ?"

T. P . toward the view that thatmarket failure evidence is solid , but intervention

may notmatch ,

Referenceddocumentsareorganizedin a folder supportingthis documentlocatedon the Bureau' s Z : drive, or in

physicalform in thecase ofcontemporaneousnotes.

06 / 06 /2018: E-mailfrom T . . aboutbriefingstrategyfor ActingDirectorMulvaney

the only two optionson thetable (this focuswas determinedpriorto abriefing)

States B. . (at least) supportingthis approach .

06 26 / 2018 ATR Briefing Deck Slides for T . .

06 26 / 2018 Pre -BriefingMeeting (see ContemporaneousNotes)

was encouraged to change "deadweightloss significant cost with minimalcorresponding benefit ," or "netnegative impact on themarket.

07/ 06 / 2018 : FinalATR BriefingDeck Slides andMemo

" To revoke the ATR provisions, theBureau would need to articulate a reasoned

basis for a determinationthat the identifiedpractice is neitherunfairnor abusive," and

" This likely would requirethe Bureau to revise many of the PaydayRule s findings...

07 / 10 /2018: E-mailfrom T .P . indicatingthe path forward

B .J and Acting DirectorMulvaneywant an "80 % done" legalanalysis aboutrevocation doneASAP.

07 / 23 / 2018: E-Mail from Mark M . with Payday Revocation BriefingMemofor Deputy DirectorIncludes07/ 23/ 2018memo stating the theory for revocation

relevantare the 7 / 20 / 2018 staff draft ofthe samedocument, andthe 7 / 22 version

that includes T . P ' edits/ comments .

08/ 28 / 2018 : Payments BriefingMemo

08 /31/2018 Payments Briefing Deck Slides andMemo

/ 2018: Discussion with LegalRegardingMann (see Contemporaneous Notes)

stated OR ' s interpretation and evidence.

Mannmemos ) showinghisassertionsare contradicted by hisdata .

10 /01/ 2018 :MootforPaydayHearingwith Legal(see ContemporaneousNotes)

. and J.L. urgedcaution in distinguishingbetweenATR and paymentsprovisions.

. also (strongly) urgedcautionwhen dealingwithMann. Suggestedwecan say"less

confidentin our assessment," butwe are still quite confidentMann' s assessment is

wrong.J. .also noted at thismeeting thatpayday-related responsesoutlined in the 9/ 25/2018version of QFR responses indicatednodecision hadbeenmadeas to what changes, ifany, to propose to the 2017 Rule, despitewhathad been conveyed internally, and that

Legalwas going to we were engaged in a process to proposeadjustmentsto therule

10 /04 /2019 : FinancialService Centers of America ( Annual Conference, Las Vegas,NV

Annualmeeting for a national industry trade group representing financial service

centers (including small dollar lenders)

A . W . ,PAD for ExternalAffairs,apparently reveals to industry leaders the Bureau' s

generalapproach to revoke the ATR provisionsbut leave the payments provision in

place

Commented 51: Thisseemedveryproblematic.Note

BrianJohnsonhadownershipofthecontentof theQFR

responses.

Commented( 6 : This is actually a reallybig deal. Atthis pointwewerepublically claimingno decisionhad been

made, we were consideringalloptions, etc Anthony' s" behind closeddoors announcementwas to paydayleaders, and we only know thatherevealedgeneralplans,though hemaywellhaverevealed specifics and/or engagedin conversations.Myunderstandingis that the Bureaulaterpublically denied any contact or discussionbetween

leadership and industry

Additionally , see previous comment for concerns aboutthe

state ofQFR responses atthis time( . contradictory

assertions) .

Precedesany formalacknowledgement, let alone announcementof the plan (which

happened three weeks later)

Concurrentwith QFR response to Congressionalinquiry statingno decision hadbeen

made (see previous entry )

staff told to ready themselves for questions

10 /09/ 2018 :Meeting with Legal and Regs (see Contemporaneous Notes )

Legalwanted to note and score alternatives considered in 2017 rule and "warm glow "

and" Federalism " aslarge enough unquantifiedbenefitstomake theproposalnet

positive.pushed back on both scoring would be bad optically and is unnecessary since those

alternativesare notrelevanthere, attributingscale to weak unquantifiedbenefits

seemed inappropriate).

10 / 11/2018 : OR Version of 1022 Analysis Sent RMRfor Review

Document titled "Payday2 . _ NPRM _ Section 1022_ DRAFT_ 10 -2- 18_ 1pm RXB_ jal2 " .

version wholly " owned " by , prior to RMRreview , though PAD and D . had

offered suggestions during drafting .

10 / 26 /2018 Bureau Public Statement AboutPayday Reconsideration

the statement: "the Bureau is currently planning to propose revisiting only the

ability -to-repayprovisions and notthepayments provisions, in significantpartbecause

the ability- to-repayprovisionshavemuch greater consequencesforboth consumers

and industry than the payment provisions."

02 /2018 : Quantification QuestionsMemo for T. P.

Outlines three issues regarding the 1022 how to treat themarket failure , how to

discussconsumerwelfare, and atwhatlevelofdetailto quantify

Decisionwasmadeto engagein minimaldiscussionof themarketfailure ( this waslater

reduced to , effectively, zero ) ,to discuss the consumerwelfareimpactsbutattempt to

caveat, and to provide quantification at a levelofdetail similar to 2017 Rule' s .

/ 14 /2018 : E-mailfrom T . P . indicating he is not persuaded by baseline discussion

Included is a longer e -mail from R . B .outlining,with citations,why the " no impact"

baselinedoesn' t work.

stateshe is not persuaded, " butgives the ok to useOR' s preferredbaselineas "we

need to move forward ."11 20 / 2018 : RMR Version of 1022 2 Analysis Sent Legalfor InitialReview

Documenttitled "PaydayATR 1022 (11-20 -18) - KMAvers to Legal" .

versionwholly "owned" by RMR, prior to review by Legal(thoughPAD had provided

influence and guidance in the drafting of this version ).

20 / 2018 :Meeting with C .M . and T . P (see Contemporaneous Notes )

at leastpartially in response to the quantification memohis

b

Commented 7 This seemed incredibly dismissive to

the work thatwent into the e -mail (multiple iterations

between Ron, Paul, and myself, based on years of

precedent, analytic best practices, internalprocesses, etc .

Also, it seemsthere was legalprecedentat this pointindicatingthat this baselinewasnotacceptable (see casecitation below )

Commented [ This struck meas really risky, aswellas conceptually and philosophicallywrong dismissive

ofOR' s expertise and thebest practicesof professionaleconomics.

for staticmodeland (implicitly)WARP, bat that s

Baugh study asserting its lenders are " illegal" and "not representative"

of the payday industry (which was > 50 % online, at this point).

Argues default costsare both very low and very high , in order to make different points

( to justify reborrowing as choice, and rationalize reborrowing followed by default,respectively ).

the videmue

12 /04 / 2018 :Meeting with T .P see Contemporaneous Notes)

. us to counting harms that are reasonably avoidable .

Harms that are not legally cognizable should not be counted in an economic analysis ."

notlegally wrong, no harm ."

pushedback ,successfully]

12 / 10 / 2018 Staff Version ofSection 1022(b )(2) analysis forPAD Review

versions on the same day PaydayATR 1022 12- 10 - 18 Draft for PAD Review " sent

to PAD for review ; " PaydayATR 1022StaffDraft for PAD Review2" contains someminor

staff editsand comments.

versionof thedocumentthatwaswholly owned by career staff ( though PADhad

provided guidance and inputduring the drafting ofthedocument).

12 / 28 /2018 : E-Mailfrom T. P . describing some remaining work

Contains a draft of the 1022markup up with comments from C . M . and the "front

office titled " Payday ATR 1022 12- 28.Mufarrige.doc," which outlinesmuch oftheattempted influence into how the staff s economic analysis should beframed and

presentedShowssome significant errors in economic reasoning ( . g . simplistic and non-falsifiable

revealed preference arguments, misunderstandingof informationalconsiderations,

skepticism and lack of understandingofsimulations, confusingsupply with quantitysupplied , etc. ).

/ 02 /2019 : E-mailfrom C . . Regarding Additional Follow -Up Points on the

Attempt to articulate a more comprehensive view ofmarket failure and intervention as

a follow up to a comment bubble C. inserted on a draft of the 1022.

includes a chain ofother, potentially relevant e-mails ( e . g . conveying that state-level

studies didn't inform the simulations, that those simulations aren 't structural, etc. ).

In attachments/ comments, Chris indicates it is " very easy to rationalize" payday

borrower behavior in a dynamic model.He does not indicate how hewould do this

(mostarguments are in static, one-periodmodels with no history or persistence). See

(draft) document" Payday Borrowing Primer_ v2" formore on how difficult this

is in practice

01/07/ 2019: E -mail from C .M . outlining 1022IssuesContainsa chain ofe-mailsleadingup to 01/ 08/2019meeting.

Commented [ : Basedon this sortofevidence, itremainsdifficult formeto accept that Tom didn ' t wantto

mediateor " take sides" when OR and Chris disagreed. Itshould have been painfully obviousbasednot just on

qualificationsand experience, buton demonstratedexpertise, that there was a betterinformed side in thesedebates

Commented ( 10] : This is stunningly naive I think the

only way this could be true, and what Chriswaseffectively

arguing for,was assuming itstrue, then bending any/ all

evidence to try to support the assumption

Commented [ (11]: Skiba and Tobacman article , for amore rigorous treatment.

Commented really seems to think the 1022 is

supposedtomotivate and justify the intervention, rather

than simply scoreit. This would be more forgivable had he(or anyone in thefrontoffice) actually asked about the

evidence, analysis, or policy implicationsthereof.

The real danger here is when he argues that the 1022

should support the reasoning in the preamble , even when it

makes questionable arguments based on selective

reading / critiquing of evidence .

Commented 13) Brianactuallyseemedannoyedby

Chrisin thismeeting, asifhewasrealizingthe" value ofhis

involvement

Commented 14 :

Commented ( 15 ): The 2017 Rule articulated themarket failure

Commented [ ( 16 ] : OR does notbelieve theseconclusions are erroneous , but instead are based on the

reliability -weighted evidence available at the time.

Detailssomeof C . M . ' responsesto previousattemptsto discusshiscritiques, andlays

out the purpose of the subsequentmeeting

out someof C . .' s idealsfor benefit cost analyses, understand

rather than prescriptive na the shows

/08 /2019 :Meeting with B. J . and C . M . to Discuss " Payday Rule Reconsideration 1022"

Meeting to discuss C. . critiques of the 1022, namely that he thought there were

additional reconsideration grounds not discussed .

Takeaway was C. . could draft standalone memo for the preamble ,butnot the/ /2019 : 1022 Briefing Doc from C . M . Asserting and Discussing That :

The shoulddiscussthe finalrule' s failure to adequatelyarticulatea marketfailure

The FinalRule's appraisalof its impacton consumerwelfaredoesnotreflectthe

consensusofthe economics literature and should be rejected in the 1022/ " The 1022should notrely on the erroneousconclusions in the FinalRule thatreborrowers suffernegativewelfareoutcomes.""The 1022 should notrely on the erroneousassumption in the final rule that the

ATR / downexemption willnot significantly restrictcredit for those consumers

experiencinga " transientshock."

Discussionof theneoclassicalmarketshould avoid the nirvanafallacy.

Note: citesmanyolder papers, and littleofthenewer research we take

numerouspapers' assertions that do not follow from their findings at face value (inc.Priestly ).

https:/ / campaignforaccountability.org/new -report-reveals payday- lendinglawyer- wrote- an -academic -study-defending -payday-lenders / and

http : // freakonomics . com / podcast/ industry _ ties _ to _ academic research / for the

optics risk had wedone this say nothing of the analytic risks of focusing on

interpretive statements ratherthan thedirectevidence)

01/ 15 / 2019 : "PaydayUpdate" Meeting with DirectorKraninger

First and only staff briefing for Director Kraninger on payday .

Briefing was scheduled for 45minutes, and started a little late .

the briefing was the NPRMs, and specifically the legalreasoning behind them .

Research personnelanswered one question about a share of borrowers meeting

certain criteria , but wasneither asked norgiven the opportunity to discuss the

costbenefit analyses or the evidence underlying them .

Specifically , there were no questions or opportunity tobrief about the cost or

benefit of these , underlying research , or analyses .

As of 7 / 15 /2019, this was the only staff briefing Director Kraninger received on payday,

and the only opportunity for staff to discuss any of the payday -related rules, research ,

etc directly with the Director . Correspondingly , the Director received no staff-level

briefing about any events described in the document that occurred after this date .

Commented 17 ): ORnotes no such assumption was

made or implied . In fact, therestriction in quantity supplied

was highlighted and emphasized throughout the analysis.

Commented [ : notes the " nirvanafallacy"

argument suggests thatneoclassicaleconomics setsup

unrealistic standards forwell-behavingmarkets, then assetsintervention is warranted if any aspectof the "nirvana

assumptions" is violated . This is neitherthe intent, nor the

practice of goodeconomics, and is notwhatwas donein the

1022. Instead, violations of the neoclassicalmodelsimply

allow researchersto sign welfare impacts, and conduct costbenefit analysesof the free marketvs market with

intervention,which may or may notoutperform even the

most flawedmarkets. That is, the the 1022s for the 2017

FinalRule and in the2019 do notcompare the

market as it exists to some ideal, butinstead compare the

market asit exists to the alternative proposed(or codified)

in therulemaking. Putdifferently thatthemarket fails to

achieve" nirvana status" is nota reason to intervene, it

simply means there is thepossibility that something more

efficientmay beattainable. The 1022' s job is to score if ,

where, and how the interventionresults in benefits and

costs relative to themarket includingwhether it improvesefficiency

Commented ( 19 effect, hewas advocating for

ignoring themajority of the available research, andhandpickingstudies that supported a specific conclusion,regardless of their vintage or quality.

Commented ( 20 : This was a side-door attemptto editthe 1022whichwassupposedto beoff the table at this

point. Atbest it wouldhave resulted in open , explicitdisagreementwithin the rule between this section and the1022 Atworst itwould haveled to the preamble' s content

forcinga rewriteofthe facts and analysis in the 1022 (i. .thelegalreasoningaffectingthereading of theevidence) .

Notealso that thehistoryofthe developmentofthese including,

importantly, how staffwasconsultedand the constraintsplaced on their

involvement in the development of the approaches) was notdiscussed .

01/ 16 / 2019: E-mail from C . M .with Alternate Document (described next) attached

E-mail chain outlines the understood takeaways from 01/08 / 2018meeting and

parameters for C . .' s proposed insert, as described by L .

Specifically that comments should be translated to " a new stand -alone legal argument -

an alternative grounds for upholding the revocation of the findings of unfairness or

abusiveness."

01/ 16 2019: C . M . Alternate Documentwith DiscussionofMann

meeting01/08 / 2019meeting, C . . craftedthis preamble insert

DiscussesMann and themarket failure, which readsas a 1022- type analysis out of place

in the preamble .

hora

10

: team rejected insert, to be

, by a non-economist, andwithoututilizing '

expertise.

01/23/ 2019: Articlepublishedaboutthe Mannstudy in whichMann states" agencyofficials

contactedhim earlierthismonth to discussthe study"

www . americanbanker . com /news/ one-study- two- vastly different-visions - for

-payday-

similar outreach to OR regarding the analysisofMann by "agency officials" (other

than RMR personnel) had occurred .

the Front Office,nor the PAD, discussed the Mann study , its strengths,weaknesses, interpretations, etc. with staff, nor did theyrequesta briefingwherebythe

Mannmemoscould havebeen shared.

Connection between this and the 01/ 16 / 2019 document seem possible01/29 /2019: E -mailfrom D . S. encompassing a chain of e-mails about late edits from T .P . and the

FO

Includes concernsregardingthe strawmanbaseline inserted by the frontoffice /PAD, removalofMann , replacement of negative effects with opposite effects "

(which , combined with the strawman baseline created a potentially misleading

implication of the proposal' s effects), etc.

01/ 30 / 2019: E mail from P. R. suggesting R. B . can concur with the 1022 analysis

Commented . P . and Legal) both

subsequently shared they believe (and mightknow ) there is

indeed a connection . That is they believe Chris had

conversations with Mann.

Commented : See 11/ 04 / 2018 bullet, above

Commented [ : This really seemedto meadeliberate attempt to suggest thata " zero effect" scoring

the rule was viable . Given the courtcase and the fact thatthe frontoffice overruled its internalexperts, this seemslegally risky. Especially since this waswholly unnecessarysuggesting a courtmightreasonablydeterminethisrepresented a concertedeffort to facilitate amisreadingofthebenefit / costanalysis.

Commented is actually evidence thatRon

wasstrongly consideringwithholding concurrence , because

of the difficulties in the process. Paulultimately , and with

fresh eyes , determined we hadwon the importantbattles

Butthe fact this e -mail exists showshow hard this processwas

Commented [ See previous comment. This really

seems problematic to me, and almost lost Ron' s

concurrence

Commented ( 26): Further edits this late in the game

arereally not good practice

Commented ( : how much staffwere

consulted ,and the relativevalue the frontoffice placed on

the experts'

01/312019 : E-mail from T largely rejecting OR ' s responses to his last -minute edits to the

back on inclusion of language suggesting the " alternative baseline " (added

over 's objection ) was a viable choice .

OR was informedthat " chosen baseline was specifically requestedby B . . and

wasnon negotiable, even if thealternativechoicewas non-viable.

presentingthis baselinewasmisleadingin thatitpresenteda false

comparisonas legitimate, and represented a continuation of baseline

problems/discussionsthatdate back to (at least) November

additionallypushedbackagainstimplicitlyconcurringwith thelegalanalysis' CVB

determination, which OR believed relied on interpretationsof studies thatwerenot

whollyaccurate.

02/01/ 2019: PAD InformedOR that C. M . HadRequestedNumerousEditsto the 1022 the

PreviousEvening.

werethat, atmostoneeditwouldbesuggested, andthatsuggestionwould

have to come directly from the Director .

edits were not discussed with OR , nor did any economist have an opportunity

to brief the Director on the economic evidence , the 2017 rule' s analysis , or the 1022

while , apparently C . M . was actively and directly lobbying for edits.

02 / 06 /2019 Numerous Press Outlets Report Statements by a " Senior Bureau Official that

Evidence Presented in the 1022Analysis .

for example, https: //www .politico.com / story 2019/02/06 /maxine-waters-payday

lenders- 1152678 ://www .npr.org /2019/ 02/ 06 /691944789/consumer-protectionbureau-aims-to -roll-back-rules-for-payday-lendingihttps:// thehill.com / policy /finance 428760 -consumer-bureau-proposes-scrappingborrower-safeguards-from -payday-loan-rule .One is The bureau estimatesthat roughly two-thirds of customerswon 't qualify for a first loan," and few of those would qualify for a second loan if therulewent forward as is, the officialsaid .

This is inaccurate: the Bureau estimated thatthe ability to borrow the first sixloans would likely not be impeded by the rule .

This appears to reference the assumed (not estimated) 66 % denialrate for ATR

loans. The Bureau did not assert this number to be accurate or implied by the

data - it was a number provided by industry - and, again , ATR loanswere not

expected to be binding until after theprincipal step down loanswere

exhausted.

quote is " Thebureau estimatesthat the numberofloansmade to the

approximately12 millionborrowerswouldbe cutin half, and that loanvolumewould

decreaseby roughly90 percent," theofficialadded, estimatingthat"roughlythreeout

offourpaydaystorefrontswould close, andasmanyasnineoutof 10 vehicletitle

storefrontswould close."

10

Commented 28 ]: suspect they (BrianJohnson,believe) didn' t understandtheevidenceor analyses,mostlybecausethey never asked, andtheir economicadviser(Chris) repeatedlyshowedhe actively willfully, given therepeatedinstruction/ correctionsthat didn' t take?)misunderstoodwhatwas in the analysis.

Commented (LJ(29 : This is pretty rough , and implicatesa number of payday -related researchers as being agents ofCCRF

Commented really did already know this, but

with less than 100% certainty . Also ,wedidn' t realize Hillary

Miller basicallywrote thePriestly paper

Bureau estimated a reduction of 90 % for vehicle title loans, not payday .

Bureau did notgeneratespecificestimatesofstorefrontclosings.

These statementscouldbeusedto arguethat senior Bureau officials did notconsider

the evidence/ analyses closely prior to signing off on the proposal.

02 /25 / 2019:Washington Post Printsan Article Based on Jennifer Priestley' s E-mailswith HillaryMiller Indicating SignificantEditorialInfluence on Her Paper

https:/ /www .washingtonpost.com / business/2019 /02 / 25 /how -payday-lending-industry

insider-tilted-academic research-its- favor/ ?noredirect=on& utm term =

fullreportshere: https: // campaignforaccountability.org/ new- report-reveals

payday-lending-lawyer-secretly -wrote-an-academic -study-defending payday-lendersBureau staff already suspected this (based on footnote in the paper thatdoes notreadlike an economistwrote it, and is quite similar to one added to the Fusrao paperbyMiller).

Bureau staff focused on the resultsdocumented in the paper, which effectivelyshowed

a zero result, andthus didn't seek to discountit in the 2017 rule .Some advocatesfor reconsidering the evidence/ analysis in the 1022 ( . . C. M .) had

argued thepaper showed strong evidence of a positive effect ofpayday on consumersand should be highlighted in the proposal, and that the author' s assertionsshould betreated as evidence . This was argued over objectionsby staff,and without consulting

with staff aboutthe issueswith the paper.

02 26 / 2019 : C .M . E-Mails to Alert OR About a Newly

responds thatwe are familiar with the study, and provides a brief evaluation of it.

. questions why OR 't cite the study in the 1022, asserts OR uses a "lower

standard " for evidence (apparent reference to OR' s use of the Mann study in the 1022

though OR neverasserted it uses a lower standard, only a scientific one with

appropriate caveats ), and urges caution aboutreferring to a working paperwhen a

publishedversionisavailable.

. respondswith a longanddetailedexplanation ofhow OR approachesits analysisof

studies.

Conversationdocumentedin e-mail" 2019. 03.04_ From RE Paperjustpublishedre

Payday "

No response from . this topic as of (at least )08/01/ 2019

03/28/ 2019 : E-mail from J. . with Case Relevant for Baseline Discussion

Contains recent district court case citing " no effect" baselinefavored by FO and PAD are

reason for overturningDepartmentofEducation action.

a circuitcourtrulingfrom thepreviousyearregardingan EPA action that predates

the internalbaseline discussion noted above.

04 / 23 / 2019: Work beginsin earnest to finalize theDelay Proposa

. andC . R . havebeenaddedto thepaydayteam asstaffeconomistsatthis point.

J. . transitionsintopartialstaff,partialsteering committeemember.

04 26 /2019: Staff version of 1022 DelayRulesentfor RMRreview

Commented 31: Note that Chris was actually coolwith this , and thanked usfor the response Itwas Tom who

pushed the issue.

Commented ( 32 : This was a commonrefrain fromTom , which we (Ronand I) originally thoughtwas tongueincheek longerbelievethat to betrue, and find it to be aflawed ( at best) or offensive(at worst) suggestion.

Commented This should have been knownto

legalexperts in the area, and seemsto meto imply there is

legal risk associatedwith implyingthe zero effectbaseline

legit, even ifwedidn' t rely on it for ouranalysis. Especially

since the proposals are estimated to have a negative and

non- trivial effect on themarket vs. thelegitimatebaseline,

which might imply to a court the Bureau relied on theimplied benefit / costrelative to the faulty baseline

Commented( ( understandtryingtobeconsistentwith whatis in therule, thisseemed..notgreat

SeePaydayDelay final rule (draft4 -26 -19) to RMR review

04 /28 /2019: RMRleadershipedits to staffversion of 1022 DelayRulereturned

PaydayDelay finalrule (draft 4 - 26 - 19) to RMRreview

05 / 3 / 2019 : RMRversion ofthe Delay Rule sentto Legal

Firstversion with the 1022 included.

Payday Delay finalrule (draft 5 -3-19) to LD review

/ / 2019 : R. B. E-mails to suggestsedits and potentialpushback on 1022 Analysis' findings.

05 /8 / 2019: Delay Rule sent to preclearancePayday Delay final rule (1022 draft 5-8 -19) Legal and RXB and OR

05 / 10 /2019: Payday - Literature Summary Memo to PAD

describing OR 's general approach to evaluating how to include , consider ,and

weigh research in the rulemakingprocess.

Drafted after PAD asked about fundingsourcesfor certain payday-related papers (on

approximately4 /25/ 2019 - intermediatedraftsstartingon 4 / 26 / 2019 also available).

Containsa table ofsignificantpaperscited in the 2017Ruleand 2019 describing

how theywere cited, their main findings, any outsidefunding sourcesOR is awareof,

andsomenotes.

05 / 16 /2019 T . P . providestestimony to Congress

ReiteratesMann' s interpretationofhisstudy that isinconsistentwith hisdata

Doesnotindicateanyofthe evidenceoutlined in the variousMannmemos, including

Mann' s ownassertion that" there isno relationshipbetweenconsumers' expectations

and their outcomes."

/ 16 / 2019: DelayRulesentto ClearancePayday Delay final rule (draft 5- 15-19 )post-preclearance 1022 _ OR _ tracked

05 / 21/2019 Delay Rule with comments from D .S ., T .P ., and C .M .

Payday Delay finalrule (draft 5- 16-19) to clearance dms tbpNote the proration argument (e . comment on pg. 71),which is effectively asserting

individual(s) in the front office are presuming theoutcomeofthe ATR revocation prior

to thepublic notice and commentperiod.

Also note comments suggesting OR ignore numerous published estimates, itsown

internalanalysis, and analyses thatoutside parties supplied during the 2017 Rule' snotice and comment period because an individual in the frontoffice "doesn ' t agreewith

them . "

05/ 21/ 2019: E -mail from C .G . Describing Proration Issue

of e -mails comprisingmultiple responses from OR personneladdressing the

appropriateness ofprorating costs and benefits in the Delay Rule.

it appears individual(s ) in the front office are assuming the outcome of another

rulemaking prior to thenotice and comment period , and are asserting we should rely on

that assumption in estimating the costsand benefits in the delay 1022.

Describeshow this also potentially relates to the baseline issue.

05 / 22/ 2019: E mail from . . indicating which ofC .M ' s comments can be ignored

Commented 35 : commentshighlightmanyof

as above notcontributingsubstantivelyto the economics) .

Commented [LJ 36 : This is INCREDIBLYrisky forboth thedelay and therevocation rules It is a really bad argumentthat, at thebest predetermines the outcomeof an ongoing

rulemaking(putting the rule at extremerisk), and atworstdoes that ANDmisunderstandsbasic countingandeconomics

Commented again ,would have

compromised OR s integrity and reputation . It isn' t clearto

meifitwas understood that this was being asked, of ifhe

really doesn' t understand the body of the evidence and

analyses cited in the 2017 and 2019 rulemakings.

Commented ( These impose enough legalrisk they

should probablyneverhavebeen considered, especially byan attorney.

Commented ) Implication is that Tom many

of these comments are less than productive.

Commented [ 40 : Tom seems to miss the point that

was making that ,while it is true that Legalprojected some

intent onto others in their tone andwording, themore

common offenders in these matters are in the front office

05 /23/2019 E-mail from J. to T . P.

Chain of e-mails that discuss tone , attribution ofintent, content concerns, and

attendance in advance of the 05/ 23 /2019meeting with Legal.

05 / 23 / 2019 Meetingwith Legal about concerns with clearance comments

. 23 . 2019 _ Payday Delay _ with RMR F) Clearance Comments . docx

Legal smeeting to discuss issues with the comments in the draft sent 5 / 21/ 2019

concerns are Characterizations ofthe Reconsideration Rulemaking ,

Characterization of theMarket Effects of the Into Effect, Descriptionsof

Mann& Pew Studies, and RemovingSummariesofCommentsand Respondingto Them

Many of these dealwith OR's sections, or contentthatshould have beeninformedby

OR

05/27/2019: DelayRule lastminute edits

See PaydayDelay finalrule (draft 5- 24 -19) to LD + TBPSee also e -mail from J. L . to L .L on 05 / 28 / 2019 detailing concerns .

05 / 28 / 2019 :Meeting with B . regarding Delay Rule

makes many assertions about bias and asymmetry in treatment of costs/ benefits in

the 1022 analysis , specifically that hebelieves OR is extending the cost estimates

beyond the 15 -months ofdelay . OR informs him that is not accurate ; C . M . argues for a

change in analysis that would extend the estimated benefits beyond 15 months,

effectively assuming/ predeterminingthe outcomeof the ATR revocationrule.05 / 28 /2019 C . . E-mails Follow UpWith Specific LanguageHeBelieveShowsAsymmetry

Asserted in the EarlierMeeting

mailchain , includingJ. .' s response.05 / 30 / 2019: New Version ofDelay Rule with Edits by Legal and OR Explaining Symmetry (as well

as other edits

o See Payday Delay final rule redline of 5 -24 draft v 5 -30

05 / 30 /2019 : J.L . E -mailindicatinghe suggests OR' acting AD concur with the

issues with the process,butthat he believes the 1022 analysis is adequate to

warranta concurrence.06 / 03 / 2019 : C. M .Comments on WhatWas Expected to be the FinalVersion of the Delay Rule

for the Director' s Briefing Book

See Paydaydelayfinalrule - rec decmemoruleTOC(draft 5 -31-19 to SE review) CGM

numerousinaccurateassertions, accusationsofORbeingmisleading, a request

to caveatrobustfindingsso that they can be challengedin the future, etc.

See Paydaydelay finalrule - rec decmemorule TOC(draft 5 -31- 19to SE review) CGM

jal KMAfor RMR's responses, many ofwhich rely on basic facts, legalissues, andgeneral

that should havebeen understood at this point in the process ( could have

beenavoidedby a carefulreadingof thedocument).

Seealso 06 -03-2019 e-mailfor RMRdiscussionofcomments.These responsesseem like an inefficientuse of timeat the point in the process

/04 / 2019: E-mail from P. R .

Commented ( This is ,at least, the third attempt by

Chris to get OR to take the same action that would likely

have put the delay and revocation rules at risk .

Commented [ A case study in how explicit wehad

to be to avoid a misreading of the evidence.

Commented( 43) Ronwasreally debatingwhether to

concur or not. He almostwithheld/withdrew hisconcurrenceafter Chris' s comments , the last minuteaddition of the strawman baseline, etc. was a really, reallyclose call.

Commented [ Eleventh hourcomments alwaysimposerisk, especiallywhen they advocate for risk - inducingtactics. Not to mention when they comeon an individual' s

4th ) review they seem like they may be attemptingtoscrutiny they would have to bear with the benefitof

more time to respond

Commented ( (45) It worth reading the comments

and the responses. It should be embarrassing to the

commenter ( asserts " the 2017 rule doesn' t do

X " and the response is " it does, in exactly theplace the

citation leadsto " ).

Commented : This isbeingvery generousandeuphemistic...

13

Commented [ 47 This was donenot to attack CM , butto highlightproblemsanddiscuss a pathforward. Also doneto makesure that the negativeimpactwas noted for folkswho mightbe able to do somethingaboutit, and to raise aflag suggesting that BJ and KK should know about this ( ifthey didn' t already).

Response to e-mailfrom J. L. highlighting concerns about the impact of C .M .

contributions to the process both in terms of legal risk and efficiency ).

06 / 06 /2019: Delay Rule Goes Live on Bureau' sWebsite

06 / 13/ 2019 : E-mail from J. . to LegalResponding to request for information about studies "reviewed or relied upon for the

2019 payday proposals.numerous attachments.

07 / 12 /2019: Conversation with Legal about Appropriate Names for Submission to Congressstaffwas asked by . . in Legalwhether C. . had worked on the payday

NPRMs/ rulemaking in 2019.

informed Legal that, by any definition they could think of, the answerwas "yes."

Legalinformed OR that C . .was fighting to have his nameremoved, and asked if there

was an obvious reason

OR staff related they knew ofno obvious reason, but agreed that the effort seemed

curious. In response to someof Legal's questions, OR staff noted that C . . had asserted

being friends with Mann,whohad received in -kind compensation from CCRF, and had

assisted with CCRF' s editing of papers, and who indicated he hadbeen in contact with

Bureauofficialsduringtherulemakingprocess.

providedexamplesofindividualswith similar(or less) involvementthan in 2017 and

2019NPRM / rulemakingefforts (comparedto C. M .' s involvementin the 2019NPRM

process)thatwerenamedin thesubmissionto Congress