CFPB Issues Examination Procedures for Military Payday Lending


The CFPB issued updates to its examination procedures for payday lending. The updated examination procedures include guidance for examiners of payday lenders that make loans to servicemembers, including reviewing for violations of the Military Lending Act. The MLA covers active duty military members and their dependents and applies to all closed-end payday loans of $2,000 or less with terms of 91 days or less that include creditors’ access to consumer deposit accounts. The MLA limits annual percentage rates on payday loans to 36%, prohibits loan rollovers (or same-creditor refinances, renewals or consolidations) unless they result in more favorable terms for the borrower, prohibits lenders from making servicemembers waive their rights under the Servicemembers Civil Relief Act, and prohibits lenders from requiring military members to repay loans by allotment of their wages. This move by the CFPB is part of an increasing focus on payday lending by both federal and state regulators. For example, both the New York Department of Financial Services and the Massachusetts Division of Banks have issued warning letters to supervised entities that deal with payday lenders (see August 20, 2013 Alert and April 16, 2013 Alert, respectively). The CFPB also released its initial findings on payday loans and deposit advance products in April 2013 (see April 30, 2013 Alert).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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