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CFPB Finalizes Rule on Payday Lending
23 October 2017
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On October 5, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule (“Final Rule”), establishing consumer protections for certain consumer credit products, including payday, vehicle title and certain high-cost installment loans. The rule will take effect 21 months after publication in the Federal Register, with certain registration requirements effective 60 days after publication.
The Final Rule prescribes, as an unfair and abusive practice, short-term or longer-term balloon payment loans, including payday and vehicle title loans, without a reasonable determination that consumers have the ability to repay the loans according to their terms. The Final Rule also identifies it as an unfair and abusive practice for a lender to attempt to withdraw payment from a consumer’s account after two failed consecutive attempts without the consumer’s specific and new authorization, and requires certain notification requirements prior to such withdrawals.
In a move likely based on the CFPB’s Final Rule, the Office of the Comptroller of the Currency (“OCC”) rescinded its 2013 supervisory guidance covering deposit advance products, citing overlap and potential inconsistencies that could be created by the application of the CFPB’s new Final Rule. More broadly, the rescission may signal that the OCC is easing limitations it has placed in the past on national banks offering such credit products.
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