CFPB May Reinstitute Strict Payday Loan Rule

The Consumer Financial Protection Bureau may reinstitute the agency’s rule that would require payday loan borrowers to demonstrate their ability to repay a loan before it is approved.

“The Bureau continues to believe that ability to repay is an important underwriting standard,” CFPB Acting Director Dave Uejio said in a statement posted on the agency’s website. “To the extent small dollar lenders’ business models continue to rely on consumers’ inability to repay, those practices cause harm that must be addressed by the CFPB.”

As originally written by former CFPB Director Richard Cordray, borrowers would have been required to demonstrate their ability to repay their loan. Uejio and CFPB director-nominee Rohit Chopra worked at the agency under Cordray.

When the Trump Administration took over the CFPB, Director Kathy Kraninger eliminated that requirement from the payday loan rule, while retaining other parts of it.

Credit union trade groups supported Kraninger’s decision but said she should have gone further in exempting all payday loans made using the National Credit Union Administration’s Payday Alternative Loan program.

Now it appears that the agency may be going in the opposite direction.

In his statement, Uejio said that years of research by the CFPB found that most of the payday loan industry’s revenue came from borrowers who could not afford to repay their loan. That led them to take out additional loans to repay previous ones.

The agency, under Kraninger, contended that there was insufficient research to justify a strict rule.

Uejio said that even though the rule has been challenged in court, the agency intends to use its authority to help borrowers it believes are being taken advantage of, including “through vigorous market monitoring, supervision, enforcement, and, if appropriate, rulemaking.”


“Our commitment to protecting vulnerable borrowers,” CFPB Blog by Dave Uejio, March 23, 2021

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