Dodd-Frank News Center

CFPB updates Payday Lending Rule small entity compliance guide

This story appeared in Bank Digest.                                   

The Consumer Financial Protection Bureau has updated its small entity compliance guide entitled "Payday, Vehicle Title, and High-Cost Installment Lending Rule: Payment-Related Requirements." The guide has been updated to address the delay of the mandatory underwriting provisions for, and the technical corrections to, the Bureau's Payday Lending Rule that were set forth in the final rule released on June 6, 2019.

CFPB issues guide for payment-related requirements of Payday Lending Rule

This story appeared in Bank Digest.                                   

The Consumer Financial Protection Bureau has issued a new Small Entity Compliance Guide for its Payday, Vehicle Title, and High-Cost Installment Lending Rule (Payday Lending Rule), specifically discussing payment-related requirements. The Bureau notes that its Feb. 6, 2019, notice of proposed rulemaking to reconsider the mandatory underwriting provisions of the Payday Lending Rule does not impact the payment-related requirements of the rule. The purpose of the guide is to provide information that may be helpful when implementing the payment-related requirements of the Payday Lending Rule.

The guide summarizes the rule's general provisions as well as its record retention and compliance program requirements as they relate to the payment provisions. In addition, examples are provided to help illustrate certain aspect of the rule.

 

Democrats write to CFPB opposing changes to payday loan rule

This story appeared in Bank Digest.                                   

Senators Jeff Merkley (D-Ore), Dick Durbin (D-Ill), and Sherrod Brown (D-Ohio) have led a group of 47 senators in writing to Consumer Financial Protection Bureau Director Kathleen Kraninger to oppose the CFPB's proposal to revise its payday loan rule to eliminate underwriting requirements.

In their letter, the senators said, "Currently under the Payday Rule, lenders will be required to verify a borrower's income, debts, and other spending in order to assess a borrower's ability to remain current and repay credit, and provide an affordable repayment plan for borrowers who take out more than three loans in succession."

They went on to say, "Repealing this rule provides a green light to the payday lending industry to prey on vulnerable American consumers. In drafting these devastating changes to the Payday Rule, the CFPB is ignoring one of the most fundamental principles of consumer finance--an individual should not be offered a predatory loan that they cannot pay back." The senators asked for answers to several questions regarding the effect of the proposed changes.

CFPB moves to eliminate payday lenders' underwriting obligations

This story appeared in Bank Digest.                                   

The Consumer Financial Protection Bureau is proposing amendments to its 2017 final rule governing "Payday, Vehicle Title, and Certain High-Cost Installment Loans" that would allow lenders to extend short-term, high-cost loans to consumers without needing to satisfy regulatory underwriting requirements. In addition to proposing to eliminate the underwriting requirements, the Bureau is proposing to extend the Aug. 19, 2019, compliance date of the rule's mandatory underwriting provisions until Nov. 19, 2020, which would enable the CFPB to eliminate the requirements before they take effect.

Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) issued a statement saying, "Eliminating these common sense protections will result in millions of hardworking families trapped in a cycle of debt and poverty." Similarly, House Financial Services Committee Chairwoman Maxine Waters (D-Calif) said she was "deeply troubled by the Consumer Bureau's proposal to gut a much-needed rule that would have reined in payday lenders and ensure consumers can afford to pay off their loans."

But House Financial Services Committee Ranking Member Patrick McHenry (R-NC) said the Bureau's "announcement on an updated payday lending rule and extended comment period will allow all stakeholders another chance to weigh in and establish new underwriting criteria. Most importantly, it will give consumers the opportunity to make their own decisions on credit availability needs for themselves and their families."

Final payday loan regulation adopted by CFPB

This story appeared in Bank Digest.                                  

The Consumer Financial Protection Bureau has adopted its anticipated short-term, small-dollar loan regulation. According to the Bureau, loans that require full or nearly full repayment at one time, such as payday loans, vehicle title loans, and deposit advance products, are the final rule's focus. Some longer-term loans that have balloon payment features also are covered. Most of the rule will take effect 21 months after it is published in the Federal Register.                                   

A core feature of the rule is a full-payment test for installment loans to ensure that consumers can afford their payments and still meet their basic living expenses and major financial obligations, although the rule provides exceptions to this test.