CFPB publishes payday loan NPRMs to reverse underwriting repayment capacity standards and delay certain compliance dates
On February 6, the CFPB released two Regulatory Proposal Notices (NPRMs) related to certain payday loan requirements under the agency’s 2017 final rule covering “payday, vehicle title and some high cost installment loans ”(the rule). As previously covered by InfoBytes, last October the Bureau announced its intention to reconsider the Rule’s mandatory underwriting requirements and address the Rule’s compliance date.
The first proposed NPRM will repeal certain provisions of the Rule relating to underwriting standards for payday loans and related products which are expected to come into effect later this year. Specifically, the CFPB proposes to repeal the part of the rule that would make it an unfair and abusive practice for a lender to grant high interest, short term secured loans or longer term lump sum secured loans. term without reasonably determining that the consumer has the capacity to reimburse. The proposed changes would also remove the mandatory underwriting requirements prescribed for determining repayment capacity, provisions exempting certain loans from mandatory underwriting requirements, as well as associated definitions, reporting and record keeping requirements. The CFPB explains that it now determines initially that the evidence underlying the identification of the unfair and abusive practice in the Rule “is not sufficiently strong and reliable to support this determination, in light of the impact that these provisions will have in the market for short-term hedged contracts. -term and longer-term lump sum loans, and the ability of consumers to obtain such loans, among others. If finalized, the proposals represent a significant change to the rule as it was finalized during the tenure of former office manager Richard Cordray in October 2017. (See Buckley Special Alert for more detailed coverage of the rule.)
The second NPRM aims to postpone the Rule’s compliance date for mandatory underwriting provisions from August 19, 2019 to August 19, 2020. Notably, the Bureau states in a press release announcing the NPRMs that the proposal to postpone the due date. Coming into force does not extend to the provisions of the Payment Rule, which “prohibit Payday and certain other lenders from making another attempt to withdraw funds from an account where two consecutive attempts have failed, unless consumers agree to further withdrawals.” Lenders will also be required to provide written notice to consumers both before the first attempt to withdraw payment from their accounts, as well as subsequent attempts involving different payment dates, amounts or channels. These provisions are not under review and will come into force on August 19, 2019.
Comments on both NPRMs will be accepted for 90 days after posting in the Federal Register.