June 6, 2016
Authored by: Bryan Cave Leighton Paisner
On June 2, 2016, the CFPB released its long-awaited proposed regulations for payday loans, vehicle title and certain high-cost installment loans. Comments on the proposed rules must be received on or before September 14, 2016.
While most payday lenders would need to make significant changes to their products and practices under the proposed rules, the final rules could well be delayed though legal challenges in court. The scope of the proposal is extraordinary, even requiring a new credit reporting system, that would need to be built, to facilitate the ability-to-repay requirements of the proposal. The CFPB is relying on its authority under the Dodd-Frank UDAAP provisions to issue the rules, which is admittedly very broad, but even that might not be enough to support this ambitious proposal.
Nevertheless, because we cannot predict how courts would ultimately rule on the CFPB’s authority, it’s important to understand the proposed rules, prepare comments, and consider what business model changes might be needed. This article therefore summarizes the key provisions of the proposal.