The Payday Lending Rule (12 C.F.R. 1041) was initially adopted by the Consumer Financial Protection Bureau (“CFPB”) in November 2017. The stated purpose of the Rule was to create consumer protections with regard to certain credit products. The Rule applies to covered loans that require consumers to repay all or most of the debt at once. Examples of covered loans include payday loans, auto title loans, deposit advance products, and longer-term loans with balloon payments. The 2017 version of the Payday Lending Rule addressed two topics. First, it contained “Mandatory Underwriting Provisions” which required lenders to determine that a consumer had the ability to repay a loan before extending credit to that consumer. Second, the Rule contained “Payment Provisions” which established certain requirements regarding attempts to withdraw payments from consumers’ accounts.
On July 7, 2020, the CFPB issued a “Revocation Final Rule,” which revoked the Mandatory Underwriting Provisions that required lenders to make the ability-to-repay determination. The Revocation Final Rule also rescinded its earlier determination that it is an unfair and abusive practice for a lender to make a covered loan without reasonably determining that consumers have the ability to repay those loans according to their terms. Consumer Financial Protection Bureau Issues Final Rule on Small Dollar Lending, Consumer Financial Protection Bureau (July 7, 2020), https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-final-rule-small-dollar-lending/.
The Revocation Rule does not, however, modify the “Payment Provisions” of the 2017 Rule. The Payment Provisions impose two types of requirements: (1) prohibited payment transfer attempts; and (2) disclosure of payment transfer attempts. Payday, Vehicle Title, and High-Cost Installment Lending Rule Small Entity Compliance Guide, Consumer Financial Protection Bureau (July 2020), https://files.consumerfinance.gov/f/documents/cfpb_payday_small-entity-compliance-guide.pdf.
These changes go into effect “90 days after date of publication in the Federal Register.” This Rule was published on July 13, 2020. Therefore, the new rule will go into effect on October 11, 2020, absent a Court order staying enforcement of the Rule. Attorneys at Joseph, Hollander & Craft LLC stand ready to advise your company on implementing the new requirements.