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CFPB Reminds Institutions Payday Lending Rule Takes Effect March 30th
Michael Christians • January 25, 2025
Following years of litigation, the Consumer Financial Protection Bureau’s 2017 payday lending rule will take effect on March 30, 2025.
Three types of consumer loans are covered by the payday lending rule:
- Short-term loans that require repayment within 45 days,
- Longer term loans with a balloon payment, and
- Longer term loans for which the APR exceeds 36% and automatic payment is required from the consumer's account.
Under the rule, covered lenders will have to adhere to both payment restrictions and notice requirements. First, when two consecutive automatic payment attempts have failed in connection with a covered loan, the lender is prohibited from attempting another withdrawal until it has obtained a new and specific authorization from the consumer. Second, the rule imposes the following notice requirements in connection with a covered loan:
- Written notice before the lender attempts to withdraw the first automatic payment from the consumer's account,
- Written notice before a subsequent automatic payment attempt that will differ in amount or effective date, and
- Written notice when two consecutive payment attempts have failed.
Lenders that do not originate more than 2,500 covered loans in a calendar year are exempt from the rule’s requirements. Additional implementation resources regarding the payday lending rule are available from the CFPB here.
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West Des Moines, IA 50266
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Michael Christians Consulting, LLC
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