CFPB Follows in Footsteps of FCA on Payday Lending
Subject: Market Transparency
Yesterday, Thursday, June 2, 2016, the Consumer Financial Protection Bureau (CFPB) published much-anticipated proposed rules aimed at curbing predatory payday lending. The CFPB follows in the footsteps of the United Kingdom’s (UK) Financial Conduct Authority (FCA), who has carried out a series of regulatory and supervisory actions since 2014 to clampdown on payday lenders. The new proposed restrictions will apply to a variety of high-cost, short-term products including payday loans, auto title loans and deposit advance products.
The rulemaking is arguably one of the largest the CFPB has proposed that was not specifically required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). It represents a major effort on the agency’s part to step out ahead of industry practices. The rule requires lenders to verify a consumer’s ability to repay a loan, limits repeated debit attempts, and restricts riskier longer-term lending options. Many in the consumer financial services sector oppose the rule, arguing that it will push consumers into illegitimate, unregulated forms of lending. Still, on the other side of the aisle, advocates like Senator Elizabeth Warren (D – MA) argue that the rules don’t go far enough.
CFPB Press Release: