There’s been no word yet, as of press time, from the Consumer Financial Protection Bureau (CFPB) on future plans for its payday lending rule, but the Federal Deposit Insurance Corp. (FDIC) website shows 60 letters received on that agency’s November request for information on how that agency might make small-dollar lending attractive to banks.
Commenters include individual banks, banking associations, community development groups, a former FDIC chair, and others. One of the letters was sent jointly by a group of 13 state attorneys general with the attorney general for the District of Columbia. The AGs focused on the legal risks for state-chartered banks seeking to offer small-dollar credit products. Among their key points is that banks – state-chartered banks, specifically – should be discouraged from entering into relationships with fringe lenders that are structured to evade state rate caps; and that they be discouraged from extending small-dollar loans without considering the consumer’s ability to repay (ATR).
As for the CFPB’s own payday rule (titled the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule), the bureau last October, about six weeks before its current director took charge, said it would revisit the rule early this year and focus specifically on the ATR provisions. Reports expect the bureau may eliminate those provisions.
Under the CFPB rule – whose effective date has been stayed by a federal court given the bureau’s stated intent to reconsider the rule – lenders must conduct a “full-payment test” to determine upfront that borrowers can afford to repay their loans without re-borrowing. For certain short-term loans, lenders can skip the full-payment test if they offer a “principal-payoff option” that allows borrowers to pay off the debt more gradually.
The CFPB said in an Oct. 26 blog post that it planned to propose revisiting only the ATR and not the payments provisions. It said it made that distinction “in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions.”
Letter from state attorneys general (Jan. 22, 2019)
Request for Information on Small-Dollar Lending (Notice in Federal Register)