CFPB Proposes Reforming Small-Dollar Rule

Feb 07, 2019
The Consumer Financial Protection Bureau proposed rescinding certain provisions of its rule on payday, vehicle title and certain high-cost installment loans. Specifically, the CFPB would drop the rule’s requirements that lenders make certain underwriting determinations before issuing such loans, which the bureau said would reduce access to credit.

As advocated by ICBA, the final rule issued in October 2017 exempts from the full-payment test and principal-payoff option lenders that make 2,500 or fewer covered short-term or balloon-payment loans per year and derive no more than 10 percent of their receipts from such loans. This exemption would remain under the new proposal.

The bureau’s revised proposal follows an FDIC request for information on ways to increase bank participation in small-dollar lending. In a recent comment letter, ICBA encouraged the FDIC to promote community banks as a model of responsible lending for small-dollar lenders and to provide flexibility for underwriting guidelines.