A new CFPB report, “Market snapshot: Consumer use of State payday loan extended payment plans,” describes the requirements of state payday loan extended payment plan laws in the 16 states that have such laws.
The report also compares extended payment plan usage to payday loan rollover and default rates. According to the CFPB, the report “is believed to be the first study to compare State extended payment plans and usage rates.”
The findings highlighted by the CFPB in its press release and in Director Chopra’s comments quoted in the press release relate to usage rates for extended payment plans. The CFPB found:
Despite the prevalence of State laws providing for no-cost extended payment plans, data shows that rollover and default rates consistently exceed extended payment plan usage rates. The Bureau has observed that monetary incentives encourage lenders to promote higher-cost rollovers at the expense of extended payment plans.
The report carries the strong suggestion that the Bureau believes there should be a greater effort by lenders to make consumers aware of the existence and benefits of extended payment plans. In the report, the Bureau references its finding in its Summer 2021 Supervisory Highlights that payday lenders had engaged in deceptive acts or practices by presenting fee-based refinance options to struggling borrowers while withholding information about contractually available no-cost repayment plan options.
The Bureau concludes the report with the statement that it “will continue to monitor lender practices that discourage consumers from taking extended payment plans and take action as necessary.”
Perhaps more significant than what the report says is what it does not say–namely, that the CFPB intends to launch a new rulemaking in the payday lending space that would purport to reinstate the “ability-to-repay” provisions in former Director Cordray’s original payday lending rule. Those provisions were rescinded by former Director Kraninger.
The new report seems to fit Director Chopra’s already well-established pattern of using his bully pulpit to convince companies and banks (in this case payday lenders) to change their behavior without the need for the resource-intensive use of more formal methods for affecting behavior like supervision, enforcement and/or regulation.
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