The consumer financial protection agency’s proposals to remove mandatory underwriting provisions of a rule aimed at protecting consumers from abusive payday lending practices, and to delay implementation of those provisions in the meantime, were published in the Federal RegisterThursday, triggering the beginning of 90-day and 30-day comment periods on the proposed rule changes.
Announced Feb. 6 by the Consumer Financial Protection Bureau (CFPB), the proposals revise the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” regulation that was finalized in 2017 and stayed from implementation by a federal judge pending the rule’s “reconsideration.”
In reconsidering the rule, the bureau has proposed to rescind provisions that:
- treat as “an unfair and abusive practice” a lender’s provision of a covered short-term or longer-term balloon-payment loan, including payday and vehicle title loans, without reasonably determining that consumers have the ability to repay those loans according to their terms;
- prescribe mandatory underwriting requirements for making the ability-to-repay determination;
- exempt certain loans from the mandatory underwriting requirements; and
- establish related definitions, reporting, and recordkeeping requirements.
The payday rule is being challenged in court by two payday industry-related groups, and the bureau’s previous acting director, John (“Mick”) Mulvaney, had said the agency planned to “reconsider” the rule provisions this year. The proposal to eliminate the ability-to-repay/mandatory underwriting provisions, released by the current director, Kathleen (“Kathy”) Kraninger, was quickly panned by a key House committee chair.
The proposal “essentially sends a message to predatory payday lenders that they may continue to harm vulnerable communities without penalty,” House Financial Services Chairwoman Maxine Waters (D-Calif.) said in a statement. She urged Kraninger to rescind the proposals and to “work on implementing a comprehensive federal framework – including strong consumer safeguards, supervision, and robust enforcement – to protect consumers from the cycle of debt.”
Comments on the proposed rescission of the payday rule provisions are due to the bureau May 15. Comments on the proposed delay of their implementation until Nov. 19, 2020, are due March 18.
Payday, Vehicle Title, and Certain High-Cost Installment Loans (rescinding provisions of current rule)
Payday, Vehicle Title, and Certain High-Cost Installment Loans; Delay of Compliance Date (mandatory underwriting provisions)
RR: In response to CFPB payday proposal, House leader sets stage for struggle over rules (Feb. 6, 2019)