States Announce New, Stricter Regulations: CFPB Restates Promise to Consumers
As part of our ongoing risk monitoring, ACHWorks uses a variety of tools to stay updated on legal and regulatory changes affecting industries we service. Below are three recent changes to laws and regulations around the country that should be noted:
Illinois: Predatory Loan Prevention Act
Recently, Illinois’ governor signed a new law, making the Illinois Predatory Loan Prevention Act effective immediately. If you offer consumer lending products in Illinois, review this Lexology article from the Krieg DeVault law firm: Click here.
Mississippi: Licensing Requirements for Consumer Installment and Title Lending
In mid-March, Mississippi’s governor reinstated licensing requirements for certain types of consumer lending and check cashing services. If your organization offers consumer financial products in Mississippi, review this Lexology article from the Buckley law firm: Click here.
Nebraska: Licensing Requirements for Installment Lenders
Effective immediately, Nebraska’s governor signed a bill that alters Nebraska’s licensure requirements for consumer finance. If you are offering consumer lending products in Nebraska, review this Lexology article from the Buckley law firm: Click here.
The CFPB: Our Commitment to Protecting Vulnerable Borrowers
The Consumer Financial Protection Bureau (CFPB) is acutely aware of consumer harms in the small dollar lending market. It is particularly concerned with any lender’s business model that depends on consumers’ inability to repay loans. The CFPB has determined the majority of this industry’s revenue came from consumers who could not afford to repay their loans, with most short-term loans in reborrowing chains of 10 or more. 1 in 5 payday loans and 1 in 3 vehicle title loans ended in default, even during periods of reborrowing. 1 in 5 vehicle title loan borrowers had their car or truck seized by the lender.
That is real harm to real people.
In 2020, the previous administration revoked parts of a 2017 CFPB rule that addressed these harms. The rule was later challenged in court, and the Bureau responded to the lawsuit.
Yesterday, the Bureau filed a brief addressing only the court’s jurisdiction hear the case. The brief does not address the rule’s underlying merits, and the Bureau’s filing is not an indication that the Bureau is satisfied with the status quo. On the contrary, the Bureau believes that these consumer harms still exist, and it will use the authority provided by Congress to address these harms through vigorous market monitoring, supervision, enforcement, and rulemaking, if appropriate.
The Bureau continues to believe that ability to repay is an important underwriting standard. As long as small dollar lenders continue to rely on consumers’ inability to repay, the CFBP must address those practices and the harm they cause.