Debt Relief Compliance Attorney
Felix Shipkevich January 17, 2018
CFPB Payday Rule
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The CFPB attempts to stop payday loan “debt traps” with its new payday rule

On October, 2017 the CFPB issued a final rule entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans,” also known as the Payday Rule, which it had been eyeing since 2013 when it started collecting consumer data on borrowed loans. In 2014 the CFPB determined  that consumers would cycle through payday loan “debt traps” and proposed rulemaking to protect consumers in 2015. In 2016, after several reports the bureau issued a proposed rule. The finalized rule covers two aspects of consumer lending products. First it identified short-term and long-term loans with “baloon payments” as an unfair and abusive practice when lenders do not determine whether consumers can actually repay such loans. The second part of the rule covers the same loans in consideration and long-term loans with an APR greater than 36% repaid directly from the consumer’s account. The Bureau identified such practice unfair and abusive to continue withdrawing form a consumers account after two consecutive payment attempts. The rule requires lenders to provide consumers with notices before attempting to withdraw payments.

“The CFPB’s new rule [” Payday Rule “] will stop payday loan debt traps by requiring lenders to take steps to make sure people can repay their loans.”—Consumer Financial Protection Bureau

Payday Rule Compliance and Deadlines Information System Approval (“RIS”)

On Tuesday, the CFPB issued a statement that January 16, 2018 is the effective date for the Payday Rule but that it intends to “engage in a rulemaking process” to reconsider the rule. Nonetheless the effective date established April 16, 2018 as the deadline to submit an application for approval to become a registred information system (RIS) under the pay day rule. Most provisions of the payday rule do not require compliance until August 19th, 2019, but the CFPB announced the possibility of deadline wavers for the preliminary application to become a RIS:

“…the Bureau may waive this deadline pursuant to 12 C.F.R. 1041.11(c)(3)(iii). Recognizing that this preliminary application deadline might cause some entities to engage in work in preparing an application to become a RIS, the Bureau will entertain waiver requests from any potential applicant.”

For the original press release please follow this link.

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