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CBA Comment Letter re NPR for Payday, Vehicle Title, and Certain High-Cost Installment Loans
The Honorable Kathleen Kraninger
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, D.C., 20552
RE: Compliance Date of Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule - Docket No. CFPB-2019-0007
Dear Director Kraninger:
The Consumer Bankers Association (“CBA”) appreciates the opportunity to provide our comments in response to the Consumer Financial Protection Bureau’s (“Bureau” or “CFPB”) notice of proposed rulemaking for payday, vehicle title, and certain high-cost installment loans (“Proposal”). CBA strongly supports effective consumer protections and, specifically, the principles of choice, transparency and fairness in customer relationships.
CBA commends the Bureau for reexamining the small-dollar credit marketplace and how lenders in this market meet consumers’ need for credit. We believe it is important that consumers receive the products they want and need at fair prices and on transparent terms. We believe it is equally important to rid the market of bad actors that engage in fraudulent transactions or violate federal laws and fashion rules that deter such conduct. As a policy matter, we support the Bureau’s intended goal of ending abusive payday lending practices by nonbank lenders. Unlike some nonbanks, depository institutions have long had their consumer lending products and practices examined against consumer protection and safety and soundness standards by various state and federal supervisory agencies, including the CFPB. However, we believe the Bureau’s 2017 Final Rule (“Final Rule” or “Rule”) discourages traditional depository lenders from remaining in or entering the small-dollar market and will have effect on current offerings due to the broad scope of the Rule.
Accordingly, CBA fully supports the Bureau’s proposed delay of the current August 19, 2019 compliance date for the mandatory ability to repay (“ATR”) provisions of the Rule by 15 months to November 19, 2020. However, because we expect the Bureau’s reconsideration of the Rule’s ATR requirements will likely identify other problems with the Rule, and due to existing deficiencies with the scope of what the Rule currently considers to be a “covered loan” and the Rule’s payment provisions, we again urge the Bureau to grant an immediate extension of the compliance date for the entire Final Rule. Without an immediate extension, banks will face tremendous uncertainty as to the Rule’s expectations and will expend resources unnecessarily, and ultimately inefficiently, to achieve compliance with a rule that the Bureau may materially change.
Therefore, the Bureau should issue an interim final rule to extend the compliance date of the entire Final Rule as the agency has previously done in other circumstances. Additionally, the Bureau should engage coordinate with the Office of the Comptroller of the Currency, the Federal Reserve Board and the Federal Deposit Insurance Corporation on its regulatory approach toward small dollar lending. Through coordination, the Bureau and its sister agencies can create a consistent regulatory framework that would remove obstacles and more effectively promote banks’ ability to preserve or expand small-dollar credit offerings and to allow them to preserve currently offered traditional bank products that are unintentionally covered by the broad scope of the Rule.
CBA Supports the Bureau’s Reassessment of the Rule’s Ability to Repay Provisions and Their Respective Compliance Date
In 2017, The Bureau finalized a strict and prescriptive rule that will stifle progress in the small-dollar market. The agency has effectively created conditions requiring compliance costs so great that they negate depository lenders’ ability to make these types of loans at a reasonable cost to consumers. These hurdles only reduce efficiencies, restrict flexibility and reduce consumer options for small-dollar liquidity. Only simple, flexible rules/guidance will foster the innovation needed to meet consumer demand for value, speed of funds availability, and ease of application.
The current Rule requires lenders, among other things, to determine, pursuant to an overly burdensome standard, whether consumers have the ability to repay their loans, prior to issuing certain short-term small dollar, payday, and auto title loans. The Rule requires an excess of added manual processes including complicated income verifications and “reasonable” projections of future expenses. Other unsecured consumer loans do not require lenders to verify income; the consumer merely needs to state their income. Verifying paystubs, tax forms, and other documentation introduces a manual process that the consumer may find excessively burdensome, delaying their access to much-needed funds and potentially driving them to an unregulated, unsafe provider to obtain them.