On January 16, the Consumer Financial Protection Bureau announced its intention to reconsider a controversial rule affecting the short-term (payday) and auto-title lending industries. This reconsideration could signal that a stripped down rule that omits a number of the rule’s more controversial provisions could be in the offing.
The original rule was finalized in October 2017, when Richard Cordray was still the head of the Bureau, and required lenders to determine whether a borrower could afford his or her loan payments while still meeting basic living expenses and other financial obligations. For short-term or auto-title loans due in a lump sum, lenders must determine whether a borrower can make a full payment of the total loan amount, plus any fees and finance charges, within two weeks or a month. For loans with a longer term and a balloon payment, lenders must determine whether a borrower can afford the highest total payments. The rule also includes additional requirements, including a principal-payoff option for certain short-term loans, loan options, and debit attempt cutoff. The rule officially took effect on January 16, yet the majority of key provisions are not scheduled for implementation until August 19, 2019.
The rule has proved controversial, as consumer advocates fully supported the measure while lenders contended that the rule’s restrictions would result in a number of lenders going out of business and reduced credit options for many borrowers. Members of Congress have introduced measures to repeal the rule under the Congressional Review Act, a tactic that proved effective with the arbitration rule.
The CFPB’s announcement did not offer any details regarding the scope of its reconsideration or any timeline for changes to the rule.