CFPB Guts Major Component of Payday Lending Rule

Today, the CFPB proposed amendments to its Payday, Vehicle Title, and Certain High-Costs Installment Loans Rule. As anticipated, the bureau is proposing to rescind the rule’s requirements that lenders make certain ability-to-repay underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans on the basis that such restrictions would limit consumer access to credit. The bureau is also proposing to delay the August 19, 2019, compliance date for the mandatory underwriting provisions of the 2017 final rule to November 19, 2020.

The bureau further indicated that it will not reconsider changes to the rule’s payment provisions. Those provisions prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless the lender obtains a new consumer authorization to withdraw funds. The payment provisions also require such lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels. These new payment obligations are more restrictive than the current federal laws in place, including the NACHA rules, and will be very problematic for lenders.

There will be a 90-day public comment period for the proposed amendments to the underwriting provisions. On the other hand, there will be a 30-day comment period for the proposed extension to the implementation date for the underwriting provisions. That said, the bureau’s comments seem to suggest the payment provisions may still go live on August 19, 2019. Accordingly, lenders should take stock of the payment provisions and be prepared for an August 19, 2019, effective date until further  notice.