The CFPB has issued highly-anticipated proposed revisions to its final payday/auto title/high-rate installment loan rule (Rule) that would rescind the Rule’s ability-to-repay provisions in their entirety (which the CFPB refers to as the “Mandatory Underwriting Provisions”). The Bureau will take comments on the proposal for 90 days after its publication in the Federal Register. In a separate proposal, the CFPB has proposed a 15-month delay in the Rule’s August 19, 2019 compliance date to November 19, 2020 that would apply only to the Mandatory Underwriting Provisions. This proposal has a 30-day comment period. Importantly, the proposals would leave unchanged the Rule’s payment provisions and the August 19 compliance date for such provisions.
Rescission of Mandatory Underwriting Provisions. The Mandatory Underwriting Provisions, which the Bureau proposes to rescind, consist of the provisions that: (1) deem it an unfair and abusive practice for a lender to make certain “covered loans” without determining the consumer’s ability to repay; (2) establish a “full payment test” and alternative “principal-payoff option;” (3) require the furnishing of information to registered information systems to be created by the CFPB; and (4) related recordkeeping requirements. In the proposal’s Supplementary Information, the CFPB explains why it now believes that the studies on which it primarily relied do not provide “a sufficiently robust and reliable basis” to support its determination that a lender’s failure to determine a borrower’s ability to repay is an unfair and abusive practice. It also declines to use its rulemaking discretion to consider new disclosure requirements regarding the general risks of reborrowing, observing that “there are indications that consumers potentially enter into these transactions with a general understanding of the risks entailed, including the risk of reborrowing.” The proposal seeks comments on the various determinations that form the basis of the CFPB’s conclusion that rescission of the Mandatory Underwriting Provisions is merited.
Preservation of Payment Provisions. The CFPB is not proposing to change the Rule’s provisions establishing certain requirements and limitations on attempts to withdraw payments from a consumer’s account (Payment Provisions) nor is it proposing to delay the August 19 compliance date for such provisions. Rather, it has declared the Payment Provisions to be “outside the scope of” the proposal. In the Supplementary Information, however, the Bureau notes that it has received “a rulemaking petition to exempt debit payments” from the Payment Provisions and “informal requests related to various aspects of the Payment Provisions or the Rule as a whole, including requests to exempt certain types of lenders or loan products from the Rule’s coverage and to delay the compliance date for the Payment Provisions.” The Bureau states that it intends “to examine these issues” and commence a separate rulemaking initiative (such as by issuing a request for information or notice of proposed rulemaking) if it “determines that further action is warranted.”
We are disappointed that the CFPB has excluded the Payment Provisions from its proposals since they raise numerous issues that merit reconsideration and/or clarification. See our legal alert for a list of some of the troublesome issues we have noted. The Supplementary Information suggests that the Bureau may be receptive to informal requests to revisit various Payment Provisions, and our Group intends to accept this invitation to comment. In addition to addressing issues we have identified to date, we also propose to include in our comment letter subjects brought to our attention by our clients and other affected parties.
