CFPB Proposes Changes to 2017 Payday Lending Rule

Notice of proposed rulemakings include revisions to rule as well as delayed compliance date.

2/7/2019 2:00 PM

CFPB Proposes Changes to 2017 Payday Lending Rule

The Consumer Financial Protection Bureau officially announced it is proposing to rescind certain provisions of its 2017 final rule governing “Payday, Vehicle Title, and Certain High-Cost Installment Loans.”

Specifically, the bureau is proposing to rescind the rule’s requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. The bureau is preliminarily finding that rescinding this requirement would increase consumer access to credit, according to a news release.

In October 2018, under the leadership of then-Acting Director Mick Mulvaney, the bureau announced that it would issue Notice of Proposed Rulemakings (NPRMs) to reconsider the rule’s mandatory underwriting requirements and to address the rule’s compliance date. 

ACA International previously questioned the bureau’s process leading up to the issuance of the small dollar loan regulation.  ACA remains hopeful that under new leadership, the bureau will take appropriate steps in all rulemakings to ensure that any new regulations are reflective of operational realities, solve an actual as opposed to a perceived problem in the marketplace, are based on empirical evidence, and adhere to important statutory requirements.

U.S. Rep. Maxine Waters, D-Calif., chair of the House Financial Services Committee, said she is “deeply troubled” by the new proposals, according to a news release on the committee’s website.

““This proposal essentially sends a message to predatory payday lenders that they may continue to harm vulnerable communities without penalty,” Waters said. “I urge Director Kraninger to rescind this proposal and work on implementing a comprehensive federal framework -- including strong consumer safeguards, supervision, and robust enforcement -- to protect consumers from the cycle of debt.” 

Ranking Member of the committee, U.S. Rep. Patrick McHenry, R-N.C., expressed the importance of revisiting the rule in a statement Feb. 6.

“I am encouraged to see Director Kraninger relying on facts and robust data, rather than outdated studies and practices when it comes to this important issue,” McHenry said. “Today’s CFPB 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.”

According to the CFPB’s news release, the bureau’s proposal suggests there was insufficient evidence and legal support for the mandatory underwriting provisions in the 2017 final rule. Additionally, the bureau is concerned that these provisions would reduce access to credit and competition in states that have determined that it is in their residents’ interests to be able to use such products, subject to state-law limitations. The NPRM proposing to rescind the mandatory underwriting requirement is open to public comment for 90 days.

In a separate notice issued Feb. 6, the bureau is also proposing to delay the Aug. 19, 2019 compliance date for the mandatory underwriting provisions of the 2017 final rule to Nov. 19, 2020. The NPRM proposing the delay is open to public comment for 30 days.

The bureau notes in the news release that the notice of proposed rulemakings do not propose to reconsider the provisions of the 2017 final rule governing payments, including reconsidering the scope of their coverage. The payment provisions prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals. The payment provisions also require such lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels. These provisions are intended to increase consumer protections from harm associated with lenders’ payment practices.    

“The bureau will evaluate the comments, weigh the evidence, and then make its decision,” said Kathy Kraninger, Director of the Consumer Financial Protection Bureau. “In the meantime, I look forward to working with fellow state and federal regulators to enforce the law against bad actors and encourage robust market competition to improve access, quality, and cost of credit for consumers.”

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