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CFPB Delays Underwriting and Reporting Requirements of its Payday Lending Rule
michaelchristians • June 25, 2019
On June 7th, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule delaying the underwriting and reporting requirements located within its payday lending rule.
First, some background. In October 2017, the CFPB promulgated new regulations at Part 1041 (“payday lending rule”) making it an unfair and abusive practice for a financial institution to:
- Make a covered loan without reasonably determining that the consumer has the ability to repay the loan according to its terms; and
- Make repeated attempts to withdraw payment for a covered loan from a consumer’s account after its second consecutive attempt to do so has failed.
For purposes of the payday lending rule, a covered loan includes certain short-term (less than 45 days), single payment and high-cost (APR greater than 36%) loans.
There are 3 main components of the payday lending rule:
| Requirement | Description |
|---|---|
| Ability to Repay Determination | Requires the financial institution to collect and review certain documents (e.g. credit report, income verification, etc.) to demonstrate that the borrower will have the ability, during the term of the loan, to make payments required under the loan as well as payments for other major financial obligations and basic living expenses. |
| Payment Transfers | Prohibits the financial institution from making repeated attempts to withdraw payment for a covered loan from a consumer's account after its second consecutive attempt to do so has failed. |
| Information Furnishing Requirements | The financial institution must furnish certain types of information to each Registered Information System about a covered loan: at consummation, while the loan is outstanding and when the loan is paid off. |
The CFPB’s June 7th rule delays the effective date of the ability to repay and information furnishing sections of the payday lending rule until November 19, 2020. However, the payment transfers section will still take effect on August 19, 2019.
For further information, please contact Michael Christians Consulting, LLC.
The post CFPB Delays Underwriting and Reporting Requirements of its Payday Lending Rule appeared first on Michael Christians Consulting, LLC.
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5438 South Prairie View Drive
West Des Moines, IA 50266
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319-325-1171
michael@mchristiansconsulting.com
Michael Christians Consulting, LLC
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