The CFPB today will finally publish its final rule on payday and vehicle title loans — released in Oct. 5 – with an effective day in mid-January (60-days after publication in the Federal Register).
As published, the rule has primary parts. First, for short-term and longer-term loans with balloon payments, the rule identifies it as an unfair and abusive practice for a lender to make such loans without reasonably determining that consumers have the ability to repay the loans according to their terms. According to CFPB, the rule generally requires that, before making such a loan, a lender must reasonably determine that the consumer has the ability to repay the loan. The agency has exempted certain short-term loans from the ability-to-repay determination prescribed in the rule if they are made with certain consumer protections.
Second, for the same set of loans and for longer-term loans with an annual percentage rate greater than 36% that are repaid directly from the consumer’s account, the rule identifies it as an unfair and abusive practice to attempt to withdraw payment from a consumer’s account after two consecutive payment attempts have failed, unless the lender obtains the consumer’s new and specific authorization to make further withdrawals from the account. The rule also requires lenders to provide certain notices to the consumer before attempting to withdraw payment for a covered loan from the consumer’s account.