The Consumer Financial Protection Bureau ("CFPB") proposed rescinding the mandatory underwriting provisions of a final rule governing "Payday, Vehicle Title and Certain High-Cost Installment Loans." Additionally, the CFPB proposed to delay the compliance date for the mandatory underwriting provisions of the final rule (originally August 19, 2019) until November 19, 2020.
The CFPB proposed to rescind:
- the "identification" provision, which establishes that it is an "unfair and abusive practice for a lender to make covered short-term loans or covered longer-term balloon-payment loans without reasonably determining that consumers will have the ability to repay the loans";
- the "prevention" provision, which creates underwriting requirements for these loans to prevent the "unfair and abusive practice";
- the "conditional exemption," for particular covered short-term loans;
- the "furnishing" provisions, which obligate lenders who are making covered short-term or longer-term balloon-payment loans to "furnish certain information regarding such loans to registered information systems"; and
- the parts of the recordkeeping provisions that are associated with the mandatory underwriting requirements.
The CFPB also proposed to rescind the Official Interpretations linked to these five provisions. Comments on the proposal to rescind the mandatory underwriting provisions must be submitted no later than 90 days following publication of the proposal in the Federal Register.
Comments on the proposal to delay the compliance date for mandatory underwriting provisions of the final rule must be submitted no later than 30 days following publication of the proposal in the Federal Register.
Commentary / Steven Lofchie
The CFPB's payday lending requirements seem intended as much to prevent payday lending by imposing regulations that are impractical to follow. The policy question is whether this effective prohibition is good for those who actually need to borrow money or whether government's protective or prohibitive policies hurt those whom it purports to help. This is not an easy question, but query whether the CFPB really tried to answer it before it adopted its anti-payday lending rules. See also CFPB Imposes Stricter Rules for Payday Lending.
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