On 3/23/21, the CFPB released a blog post by Acting CFPB Director, Dave Uejio. In this post, Mr. Uejio explains ongoing concerns with the small dollar lending market. For example, the blog post begins with this:
“The CFPB is acutely aware of consumer harms in the small dollar lending market, and is particularly concerned with any lender’s business model that is dependent on consumers’ inability to repay their loans. Years of research by the CFPB found the vast majority of this industry’s revenue came from consumers who could not afford to repay their loans, with most short-term loans in reborrowing chains of 10 or more. One-in-five payday loans, and one-in-three vehicle title loans, ended in default, even including periods of reborrowing. And one-in-five vehicle title loan borrowers ended up having their car or truck seized by the lender. That is real harm to real people.”
As the blog post continues on, Mr. Uejio seems to call out the “prior administration” who issued a rule in 2020 to revoke parts of a 2017 CFPB rule that “would have addressed these harms.” Specifically, the CFPB published a Payday Lending Rule on November 17, 2017 to to establish regulations for payday loans, vehicle title loans, and certain high-cost installment loans. The 2017 Payday Lending Rule addressed two discrete topics. First, it contained a set of provisions with respect to the underwriting of certain covered loans and related reporting and recordkeeping requirements. These provisions are referred to as the “Mandatory Underwriting Provisions.” Second, it contained a set of provisions establishing certain requirements and limitations with respect to attempts to withdraw payments from consumers’ checking or other accounts and related recordkeeping requirements. These provisions are referred to as the “Payment Provisions.”
While the 2017 Payday Lending Rule became effective on January 16, 2018, most provisions of the 2017 Payday Lending Rule had a compliance date of August 19, 2019.
On February 14, 2019, the Bureau published a proposal to delay the August 19, 2019 compliance date for the Mandatory Underwriting Provisions and a separate proposal to revoke the Mandatory Underwriting Provisions. On June 17, 2019, the Bureau published a final rule that delayed the compliance date for the Mandatory Underwriting Provisions to November 19, 2020.
On July 7, 2020, the Bureau issued a final rule to revoke the Mandatory Underwriting Provisions, which meant that lenders no longer needed to comply with the Mandatory Underwriting Provisions.
In the current 3/23/21 blog post, Mr. Uejio was clear that the CFPB still intends to take action to limit harm relating to the small dollar lending market. Specifically, Dave Uejio concluded the blog post with this statement: “To the extent small dollar lenders’ business models continue to rely on consumers’ inability to repay, those practices cause harm that must be addressed by the CFPB.”
The CFPB blog post can be found here.