The CFPB’s proposed amendments to its Payday, Vehicle Title, and Certain High-Costs Installment Loans Rule have changes that are generally disliked by consumer advocacy groups and applauded by them as well. In the “dislike” column, the rule’s requirements that lenders make certain ability-to-repay underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans are to be rescinded. The Bureau contends that those requirements limit consumers access to credit. The Bureau is also proposing to delay the August 19, 2019, compliance date for the mandatory underwriting provisions of the 2017 final rule to November 19, 2020.
However, in the applauded column, the proposed rule also makes clear that the Bureau is going to reconsider changes to the rule’s payment provisions, which prohibit payday and certain other consumer lenders from making a new attempt at an ACH withdrawal from an account where two consecutive attempts have failed, unless the lender obtains a new consumer authorization to withdraw funds. The proposed rule also would require subject lenders to provide written notice to their consumer borrowers before making the first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels. These are new obligations and are more restrictive than any current federal laws, including the NACHA rules. Meeting these requirements will require substantive changes to the processes lenders currently have in place and will likely expose them to consumer claims, including class actions and government enforcement. So, while the alleviation of the cumbersome ability to repay collection of data and analysis is welcomed by affected consumer lenders and may open the door to more credit flowing to consumers who need these types of loans, the payment hurdles may offset those gains.
There is a 90-day public comment period for the proposed amendments to the ability to repay provisions of the propose rule. But there is only a 30-day comment period for the proposed extension to the implementation date for those provisions. Nevertheless, the new payment provisions look as if they will be implemented as of August 19, 2019. Affected lenders therefore should not delay in beginning to put in place those policies, procedures and oversight needed to comply with those payment provisions on or before the effective date.