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Payday, Vehicle Title, and Certain High-Cost Installment Loans

The Bureau of Consumer Financial Protection (CFPB) issued final rule to delay the August 19, 2019 compliance date for the mandatory underwriting provisions of the regulation promulgated by the Bureau in November 2017 governing Payday, Vehicle Title, and Certain High-Cost Installment Loans (2017 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 rule exempts 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.

Compliance with these provisions of the Rule is delayed by 15 months, to November 19, 2020. The Bureau also made certain corrections to address several clerical and non-substantive errors it identified in other aspects of the Rule.

The Bureau released a table of content for this final rule as well as an unofficial, informal redline to assist industry and other stakeholders in reviewing the changes that this final rule makes to the regulatory text and commentary of the 2017 Final Rule.

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Published by Jacqueline Maduneme July 6, 2019