Congress and the Trump administration have done an excellent job of shaking up the Consumer Financial Protection Bureau (CFPB). Acting Director Mick Mulvaney has approached the job as if it were a permanent post, and Congress has been more engaged than ever in reforming the bureau. Here’s a very brief overview.

• In the CFPB’s semi-annual report, Mulvaney formally asked Congress for four specific reforms: fund the bureau through Congressional appropriations; require legislative approval of major bureau rules; ensure that the director answers to the president in the exercise of executive authority; and create an independent inspector general for the bureau.
• Mulvaney called for evidence to ensure that the CFPB is fulfilling its proper and appropriate functions. The bureau has issued 12 formal Request for Information (RFI) noticeson topics ranging from how the bureau handles complaintsto its rulemaking, enforcement, and civil investigative demand
• The bureau amended the murky “know before you owe” mortgage disclosure rule.
• Mulvaney asked Congress to turn the CFPB into a bipartisan commission.
• Congress used the Congressional Review Act (CRA) to nullify the CFPB’s arbitration rule.
• The Senate voted to nullify the CFPB’s auto lending rulewith the CRA, and the House appears set to do the same.

Of course, much more needs to be done. A great next step would be for Congress to nullify former director Richard Cordray’s parting gift, known as the payday lending rule.

The CFPB has announced it will reconsider the rule, and both the House (Rep. Dennis Ross, R-Fla.) and Senate (Sen. Lindsey Graham, R-S.C.) have introduced CRA resolutions to nullify it. Axing the controversial rule is the best option because it would leave regulatory decisions for these loans with the states, where they belong.

The payday rule is the quintessential CFPB regulation, a testament to the strong anti-free-enterprise bias built into the bureau. Many have written about the flawed reasoning behind the payday rule, so I won’t go into all of the details here. But here are a few key points:

• Customer testimonials and academic research show that payday customers typically understand exactly what kind of debt they are getting into and that they highly value the service.
• The CFPB’s own data fail to support a systemic problem in the payday industry. Four years of raw (i.e., completely unverified) complaints total less than one tenth of one percent of the number of payday loan customers served each year.
• Advocacy groups, such as Ohioans for Payday Loan Reforms, claim payday loans carry astonishingly high annual percentage rates (APR), but the APR does not apply to the typical payday loan.

The APR represents the actual rate of interest someone pays over the course of a year due to compounding, the process whereby interest is added to unpaid principal. Typically, payday loan customers do not borrow for a full year, and the interest charges do not compound.

A customer who pays $30 to borrow $100 for two weeks pays a fee at a rate of 30 percent—not an APR of 591%.

Regardless, no third party can objectively state that lenders are charging consumers too much for their services. That’s a determination made by customers when they opt to decline loan terms. The payday rule empowers government officials to second-guess consumers—imposing their judgment on how prospective borrowers should value goods and services.

Individuals should be left free to assess their own needs, circumstances and values—and make their own decisions accordingly. Government should not construct a framework that allows a handful of distant bureaucrats – who are no less prone to error than anyone else – to pick and choose what borrowing options everyone else can and can’t have.

If the government imposes rules to “protect” people from paying $10 for soy-free-cage-free eggs, $24 for soap, $4 for artisanal toast, $90 for “distressed” skinny jeans, or $85 for a men’s haircut, these goods and services would eventually disappear from the market, along with the jobs provided by making them available. But the demand for these items would not disappear, which is why it strains all reason to argue that strictly limiting them would enhance consumer welfare.

The very same principles apply to payday loans.

Policymakers have no more moral authority to stop someone from paying $30 to borrow $100 than they do for preventing someone from paying $24 for soap. Policymakers should start with this assumption instead of trying to set arbitrary interest rate caps and time limits that prevent people from getting the credit they need.

Many critics of the short-term lending industry, such as Sen. Elizabeth Warren, D-Mass., recognize that private firms would not be able to provide these services under a restrictive framework like the CFPB’s. They see the profit motive as the problem, and they want the government, in particular the U.S. post office, to provide these loans.

In the New Republic, author David Dayen suggests that “Instead of partnering with predatory lenders, banks could partner with the USPS on a public option, not beholden to shareholder demands, which would treat customers more fairly.”

It is tempting to summarily dismiss this idea as a joke, especially given the Postal Service’s dismal financial track record (in spite of its government-monopoly), but doing so would be a major mistake.

The idea made it into the Democratic Party’s 2016 platform, and Sen. Kirsten Gillibrand, D-N.Y., recently introduced legislation that would “wipe out” payday lending by turning every one of the Postal Service’s 30,000 locations into a government-backed short-term lender.

Even worse, this idea goes well beyond wiping out payday lenders.

Gillibrand exposed the real game when she shared her vision for these public-backed banks: That they provide “low-cost, basic financial services to all Americans.” Gillibrand continued:

The federal government has backed financial institutions directly and indirectly for decades with FDIC insurance, FHA backing, and bailouts. But those 'for-profit' banks have left too many behind. It's time to close the gap — and this time, no one will get rich on the taxpayers' dime.

Nobody should doubt that officials such as Sens. Warren and Gillibrand ultimately want to convert private banks to public institutions. What will be particularly interesting to see is whether all that government backing – the FDIC, the FHA, Fannie and Freddie, etc. – finally comes back to bite the banks that have lobbied so hard for so long to keep it.