CFPB Issues Final Rule on Payday Lending

The Consumer Financial Protection Bureau (Bureau) has issued a final rule delaying the August 19, 2019 compliance date for the mandatory underwriting provisions of the 2017 Payday Lending Rule to November 19, 2020. The Bureau issued this final rule to create consumer protections for certain consumer credit products. 

The rule has two primary parts. 

First, for short-term and longer-term loans with balloon payments, the Bureau is identifying it as an unfair and abusive practice for a lender to make such loans without reasonably determining that consumers have the ability to repay the loans according to their terms. The rule generally requires that, before making such a loan, a lender must reasonably determine that the consumer has the ability to repay the loan. The Bureau has exempted certain short-term loans from the ability-to-repay determination prescribed in the rule if they are made with certain consumer protections. 

Second, for the same set of loans and for longer-term loans with an annual percentage rate greater than 36 percent that are repaid directly from the consumer’s account, the rule identifies it as an unfair and abusive practice to attempt to withdraw payment from a consumer’s account after two consecutive payment attempts have failed, unless the lender obtains the consumer’s new and specific authorization to make further withdrawals from the account. The rule also requires lenders to provide certain notices to the consumer before attempting to withdraw payment for a covered loan from the consumer’s account.  

The Bureau has also provided an unofficial redline illustrating the changes the Delay Final Rule makes to the 2017 Payday Lending Rule and an executive summary of the Delay Final Rule. They are available on the Bureau’s Web site.