CFPB Proposes Rule Aimed at Protecting Customers of "Payday" Loans

The Consumer Financial Protection Bureau ("CFPB") requested comments on its proposal to establish payday loan regulations that create protections for consumers with regard to certain credit products. The proposed rules govern "covered loans," which include short-term payday and auto title loans of 45 days or less, as well as loans for which the lender charges a total, all-in annual percentage rate that exceeds 36 percent and are either repaid directly from the consumer's account or income, or secured by the consumer's vehicle.

Subject to certain conditions, the proposed regulation generally requires that a lender:

(i) reasonably determine that the consumer has the ability to repay a covered loan before the lender makes a loan to that consumer;

(ii) provide certain notices to a consumer before attempting to withdraw payment for a covered loan from the consumer's accounts; and

(iii) prescribe processes and criteria for the registration of information systems, as well as requirements for furnishing loan information to, and obtaining consumer reports from, those registered information systems.

In addition, the CFPB issued a Request for Information ("RFI") concerning risky products and practices that are not covered specifically by the proposed rule.

Comments on the proposal must be submitted by September 14, 2016. Comments on the RFI must be submitted by October 14, 2016.