CFPB Proposes Amendments to Payday Rule and Its Compliance Date

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On February 6, 2019, the CFPB released two Notices of Proposed Rule Making (NPRM).  The first NPRM proposes to rescind certain underwriting provisions of the Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule and the second NPRM proposes to delay the Rule’s compliance date to November 19, 2020.

The Rule became effective on January 16, 2018 and established regulations for payday loans, vehicle title loans, and certain high-cost installment loans. According to the first NPRM, the CFPB proposes to rescind portions of the mandatory underwriting requirements of the Rule including: (1) a provision related to the requirement that lenders determine that consumers have the ability to repay covered short-term loans or longer-term balloon-payment loans according to their terms; (2) a provision related to the requirement that lenders establish specific underwriting requirements to prevent unfair and abusive practices; (3) a provision relating to conditional exemption of certain covered short-term loans; (4) provisions related to the requirement that lenders making covered short-term or longer-term balloon-payment loans to furnish certain information regarding such loans; and (5) provisions related to recordkeeping associated with the mandatory underwriting requirements.  The CFPB reports that it analyzed a number of data points regarding the industry prior to proposing these changes and requests comments regarding the rescission of the mandatory underwriting provisions be submitted by May 15, 2019.

Moreover, due to the proposed changes to the rule, the CFPB is also proposing extending the Rule’s compliance date from August 19, 2019 to November 19, 2020.  The CFPB reports that it is concerned that if the compliance date is not delayed, industry participants will expend significant resources and incur significant costs in order to comply with the Rule.  The CFPB also indicated that industry participants could experience substantial revenue disruptions that could affect their ability to stay in business once the compliance date has passed.  Additionally, affected entities reported significant obstacles in compliance with the Rule, including more immediate compliance dates for state’s versions of the Rule.  The CFPB requests comments regarding the delay of the compliance date be submitted by March 18, 2019.

Furthermore, the CFPB reports that it is also examining a rulemaking petition it received requesting debit card payments be exempted from the Rule’s payment provisions as well as informal requests to exempt certain types of lenders or loan products from the Rule’s coverage.  However, the CFPB is not proposing to reconsider the payment provisions of the Rule at this time.

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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