CFPB issues report on payday loan extended payment ahead of appellate court case

The CFPB found that payday loan borrowers rarely used extended payment plans for managing payday loans that they could not pay when due, in a report issued today. Instead, payday loan rollover and default rates substantially exceeded extended payday plan usage rates. The report compared extended payment plan usage rates to rollover and default rates for payday loans in the 16 states and other jurisdictions that authorize payday loans and address extended payment plans.

The report comes as the Fifth Circuit Court of Appeals is set to her oral argument on May 11 in the payday lenders’ challenge to the 2017 CFPB rule governing short-term loans. When issued in 2017, the rule included prescriptive underwriting provisions and payment provisions, but it now includes only the payment provisions, after the CFPB rescinded the rule’s underwriting provisions in 2020.

The rule’s payment provisions prohibit lenders, including banks, from making a new attempt to withdraw funds from an account after two consecutive failed attempts without consumer consent. Those provisions exempt attempted transfers by institutions that hold the borrower’s account and do not charge an insufficient funds or overdraft fee for the attempted withdrawal. The rule also exempted completely banks and other depository institutions that made 2,500 or fewer small-dollar loans in each of the current and previous years and for which these loans account for no more than 10% of revenues.