On February 6, 2019 the Consumer Financial Protection Bureau issued two notices of proposed rulemaking (NPRM) related to the Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule (2017 Payday Lending Rule).
As finalized, the 2017 Payday Lending Rule has two primary parts:
1) Subject to certain exceptions, for short-term and longer-term loans with balloon payments, it is unfair and abusive for a lender to make such loans without determining that consumers have the ability to repay the loans according to their terms.
2) For the same set of loans and for longer-term loans with an annual percentage rate greater than 36 percent that are repaid directly from the consumer’s account, it is unfair and abusive 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. In addition, before withdrawing payment for a covered loan from the consumer’s account, lenders must provide certain notices to the consumer.
This rule was initially proposed in June 2016 with a final rule issued in October 2017 and published in the Federal Register on November 17, 2017. The rule was effective on January 16, 2018, however, most provisions have a compliance date of August 19, 2019. If finalized, the NPRMs would rescind certain underwriting provisions in the current rule and delay the effective date of the rule until November 19, 2020.
The NPRM related to rescinding the underwriting provisions states, “[t]he provisions of the Rule which the Bureau proposes to rescind (1) provide that it is an unfair and abusive practice for a lender to make 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; (2) prescribe mandatory underwriting requirements for making the ability-to-repay determination; (3) exempt certain loans from the mandatory underwriting requirements; and (4) establish related definitions, reporting, and recordkeeping requirements.”
The notice of proposed rulemaking related to rescinding the mandatory underwriting provisions of the 2017 Payday Lending Rule is available here. The notice of proposed rulemaking related to delaying the implementing of the 2017 Payday Lending Rule is available here.