CFPB payday lending rule coming soon

2017-10-21T09:24:32+00:00

Last week, the CFPB issued its semi-annual rulemaking agenda. While the Bureau stated that it was “carefully reviewing” the extraordinary number of comments received in response to its proposed payday rule, it did not provide an estimated date for issuing a final rule.

Nevertheless, there has been increased speculation that the Bureau will move quickly to issue a final payday rule before CFPB Director Richard Cordray’s anticipated departure from the Bureau this fall. Here are a few reports discussing the likelihood of an upcoming final payday rule.

Here are a few excerpts from Kate Berry’s article in American Banker:

The CFPB’s decision to finalize its arbitration rule earlier this month has bolstered the effort to finish the controversial payday rule, because it’s not clear Republicans will have the necessary votes to repeal either regulation.

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To be sure, Cordray has not said that he plans to leave before his term ends in July 2018. But he is widely expected by Republican lawmakers to run for governor of Ohio, which would have him leaving office by the fall.

As a result, the CFPB wants to move forward on the payday lending rule before Cordray departs, according to experts. If the agency waits until after Cordray leaves, the Trump administration could try to appoint an acting director in his stead who might stop any pending rulemaking. Observers say that the agency could move ahead as early as August but that it is likely to act before the end of September.

The short-term, small-dollar lending industry has raised concerns about the rule, which would be the first federal regulation of payday, auto-title and certain other high-cost installment loans.

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Cordray is personally involved in the rulemaking process, going so far as to set up a conference room near his office that is serving as a “war room” in the final push to finish the payday rule, according to one industry expert.

One reason for his interest is that Ohio has been at the forefront of payday lending reform during the past decade. When Cordray was Ohio’s attorney general, state legislators passed the Short-Term Lending Act in 2008, capping annual interest on short-term loans at 28%.

“There is no way that Cordray is going back home to Ohio without” a payday rule, said Isaac Boltansky, a policy analyst at Compass Point Research & Trading.

Earlier this week, Evan Weinberger of Law 360 published an article titled CFPB Says Payday Lending, Debt Collection Rules Coming:

The Consumer Financial Protection Bureau on Thursday said it intends to move forward with rules for the payday loan and debt collection markets even as rumors swirl about the future of the bureau’s director and Republicans look to nullify a recently released major regulation.

The CFPB said in its mid-year rulemaking agenda that it was reviewing comments and planned to move forward with two of the biggest regulations remaining on its regulatory docket – one governing the payday lending industry and another the market for debt collection. While the bureau did not provide a firm date for those rulemakings, both rules appear to be on track for release later this year.

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Undeterred by the potential reversal of its arbitration rulemaking, the CFPB said it plans to continue work on its payday lending rule. The bureau is currently reviewing more than 1 million comments it received on its initial June 2016 proposal for payday loans, which are short-term, small dollar loans that often carry high interest rates; auto title; and other short-term loans.

The payday proposal called on lenders to review whether borrowers had the ability to repay the loans they take out and limit the number of loans a borrower could take out in quick succession.

The proposal has received a great deal of pushback from the industry, and consumer advocates had hoped for more from the bureau.

The National Law Review indicated some skepticism about the CFPB’s last minute rulemaking push:

The CFPB’s agenda indicates that its initial review of comments on the proposed Payday, Vehicle Title, and Certain High-Cost Installment Loans rule (the “Payday Loan Rule”) was scheduled for completion in June 2017, but gives no estimated date for issuance of a final rule. Having received “more than one million comments” in response to the proposed rule, the CFPB may be hard-pressed to justify the issuance of a final Payday Loan Rule within a few months after completing its initial review of the comments if it is, in fact, “carefully considering” the extraordinary number of comments.

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