The Consumer Financial Protection Bureau today said it would begin a rulemaking under which the CFPB “may reconsider” its rule regarding short-term, small-dollar loans. Today is the rule’s effective date, although most provisions do not require compliance until Aug. 19, 2019.
Finalized in October 2017, the rule imposes an ability-to-pay test on a wide swath of small-dollar loans of 45 days or less, including payday loans, auto title loans, deposit advances and longer-term loans with balloon payments. The rule also includes provisions limiting attempts to withdraw payment from borrowers’ accounts, but includes an exception for banks that hold the borrower’s account and attempt to withdraw payment without assessing an NSF or overdraft fee.
As the American Bankers Association advocated, the bureau exempted entirely small-dollar loans from lenders that made fewer than 2,500 of these loans in each of the current and previous years and for which these loans account for less than 10 percent of revenues — a provision that protects banks’ flexibility to make small-dollar “accommodation loans” for their customers. In another win for the banking industry, the bureau exempted from the rule’s ability-to-repay test installment loans of more than 45 days, signaling the bureau’s interest in encouraging bank participation in this market. For more information, contact ABA’s Jonathan Thessin.