ACA Submits Comments Opposing the CFPB’s Payday Lending Proposed Rule

10/10/2016 1:00 AM

Focusing on the flawed process that led to the Proposed Rule, ACA urged the CFPB to withdraw the misguided proposal and take appropriate steps to ensure that any new regulations are reflective of operational realities, demonstrate an accurate understanding of consumer need, and adhere to important SBREFA requirements.


On Friday, ACA International submitted comments urging the Consumer Financial Protection Bureau to withdraw its Proposed Rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans. In the comments, ACA asserted that procedural deficiencies in the rulemaking have resulted in a misguided set of proposals that will cause catastrophic impacts to the small dollar lending market, forcing businesses to shut down and taking away access to credit for millions of Americans who will have nowhere else to turn in times of financial emergencies. 

In June, the CFPB released the Proposed Rule which contained complex and onerous requirements related to payday loans, vehicle title loans, and certain high-cost installment loans.  Central to the Proposed Rule is the requirement that covered lenders would have to reasonably determine that a consumer will have the ability to repay before making a loan. 

In its comments, ACA emphasized that for a new rule to be well-reasoned and lawfully developed, it is critical for the CFPB to engage in rulemaking efforts on the basis of actual evidence and not on preconceived ideas about how an industry works.  In the current rulemaking, however, instead of taking stock of all the available evidence and adjusting the proposal to properly balance the various interests at stake, the CFPB seemingly decided to ignore or discount information that would detract from its predetermined starting point that small dollar loans are essentially harmful to consumers.

As a result, ACA asserted that the Proposed Rule is arbitrary and capricious and should therefore be pulled to reflect evidence and feedback from all stakeholders, whether or not the input is consistent with the CFPB's tightly held, yet unproven, views on the small dollar lending market. 

In addition, ACA also described why it is critical for the CFPB to seriously consider the impact of its rules on small businesses and appropriately adjust regulations to avoid a disproportionate impact on those businesses as required by the Small Business Regulatory Enforcement Fairness Act. 

Although the Bureau convened the small dollar lending SBREFA panel on April 27, 2015 and concluded the process within the required 60 day timeframe, it nevertheless failed to approach the process in a meaningful way as contemplated by the statute. ACA described how the CFPB ignored crucial feedback and did not give real consideration to reasonable alternatives put forth by the small business representatives during the SBREFA process.  Citing a letter written by some of the SBREFA participants to the congressional small business committees, ACA asserted that the CFPB did not exercise its SBREFA duties in a good-faith way to obtain meaningful feedback from small businesses and instead sought simply to “check the box.” 

Given that the Bureau approached the SBREFA process in a purely perfunctory way, ACA stated that if the CFPB does not take steps to rectify the SBREFA deficiencies, a dangerous precedent will be set and the lawfulness of any related Final Rule will be compromised.

Due to its longstanding history and broad membership, ACA International is uniquely positioned to advocate on behalf of the credit and collection industry. ACA will continue to work to ensure that the CFPB's rulemaking efforts are well-reasoned, fairly balanced, and consistent with its statutory authority. 

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