CFPB Plans Limited Enforcement of Payday Lending Rule

Sheppard Mullin Richter & Hampton LLP

On March 28, the CFPB announced that it will not prioritize enforcement or supervision of the remaining provisions of its Payday, Vehicle Title, and Certain High-Cost Installment Loans Regulation, which were set to take effect on March 30. 

According to the Bureau’s public statement, it intends to focus its oversight on other areas it considers to be more urgent, including protections for military personnel, veterans, and small businesses. While the Bureau stopped short of formally suspending the rule, it signaled that it may propose additional rulemaking to narrow the scope of the current framework.

The 2017 rule initially included underwriting requirements intended to assess borrowers’ ability to repay short-term loans. However, those requirements were rescinded in 2020, leaving only the “payment provisions” in place. These provisions are:

  • Limit repeated withdrawal attempts. The rule banned the practice of debiting a borrower’s account after more than two failed attempts without renewed authorization, deeming this practice unfair and abusive. 
  • Notice requirements. The rule requires that lenders give consumers certain notices, such as an advance notice before attempting to withdraw a payment for the first time and notice of the consumer’s rights when two consecutive payment attempts fail.

Putting It Into Practice: The CFPB’s decision not to prioritize enforcement of the rule’s payment provisions reflects a shift in agency focus under new leadership (previously discussed here). While the rule is still effective as of March 30, lenders may see reduced supervisory scrutiny in the near term.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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