Tik Tok: The Compliance Clock Is Ticking for Small-Dollar Lenders in 2020

[co-author: Hurshell K. Brown - Beyond Finance, LLC]

INTRODUCTION -

Small-dollar lenders waited through most of 2020 for the Consumer Financial Protection Bureau’s (“CFPB’s”) final rulemaking addressing payday, vehicle title, and certain high-cost installment loans. Meanwhile, the CFPB, the Federal Trade Commission (“FTC”), and various states continued to take action to curtail certain practices. This survey addresses compliance issues related to the smalldollar lending industry over the past year, including federal rulemaking, federal and state enforcement actions, significant court decisions, and state legislation.

FEDERAL RULEMAKING

SMALL-DOLLAR RULEMAKING

In July 2020, the CFPB ratified the payment provisions included in the 2017 final rule governing Payday, Vehicle Title, and Certain High-Cost Installment Loans, rescinding the ability-to-repay provisions of that rulemaking. The payment provisions prohibit certain conduct, require notices to consumers in certain instances, and regulate how small-dollar lenders making covered loans obtain payment transfers from borrowers. At the time of this writing, the U.S. District Court for the Western District of Texas has stayed the rulemaking’s compliance date in connection with a pending case between the CFPB and trade groups.

Originally published in The Business Lawyer; Vol. 76, Spring 2021.

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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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