On Wednesday, April 20, 2016, the Consumer Financial Protection Bureau (“CFPB,” or “Bureau”) released a report, entitled “Online Payday Loan Payments” (“Report”), which examines short-term, small-dollar loans—or payday loans—originated by online lenders. The Report is the CFPB’s third study on the short-term lending market and is released just weeks in advance of the Bureau’s anticipated proposed rule on this issue.

Notwithstanding the fact that borrowers expressly provide prior authorization for the lender to collect payments by initiating an electronic transaction, the CFPB alleges that borrowers often face unanticipated costs in connection with their online short-term loans due to overdraft or bank fees charged when borrowers have insufficient funds in their bank accounts. In announcing the Report, CFPB Director Richard Cordray emphasized that online loans “may impose large costs, both tangible and intangible, that go far beyond the amounts paid solely to the original lender. So the true costs of these loans, taken in the aggregate, must be kept in mind as we assess the effects” on consumers.