CBA Comment Letter re Proposed Rule - Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule

The Honorable Kathleen Kraninger


Consumer Financial Protection Bureau

1700 G Street, NW

Washington, D.C., 20552


RE: Proposed Rule - Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule - Docket No. CFPB-2019-0006


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 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. 


It is important to state plainly that even though the CFPB has had exam authority over the nation’s larger depository institutions for over seven years, the Bureau has never found that any depository institution’s short-term, small-dollar lending products were either “unfair” or “abusive” as is asserted by the Bureau’s 2017 Final Rule (“Final Rule” or “Rule”).  Unless the CFPB delays all the provisions of the Rule, depository lenders will be discouraged from providing responsible forms of short-term, small-dollar credit to the consumers who need it most, and will have the effect of reducing the availability of other responsible credit products to consumers due to the overly broad scope of the Rule (e.g. wealth products).


Accordingly, CBA fully supports the CFPB’s proposal to rescind the provisions in the 2017 Rule related to the required ability to pay assessment for covered short-term and longer-term balloon payment loans, and associated reporting and recordkeeping requirements (“Ability to Repay Provisions” or “ATR”).


Specifically, the Proposal would rescind the following:


  • Identification of Unfair and Abusive Practice: The provision under which it is an unfair and abusive practice for a lender to make a covered short-term loan or longer balloon-payment loan without making a reasonable determination that consumers will have the ability to repay the loans according to their terms.
  • Ability to Repay Determination Requirement: The provisions that prescribe the mandatory underwriting requirements for making ability to repay determinations to prevent unfair and abusive practices.  The provisions require lenders to do the following when a consumer applies for a loan: obtain a written statement from a consumer with respect to his or her income and financial obligations, obtain verification of the income and financial obligations, obtain a report on the consumer from a national consumer reporting agency and a report from a registered information system, and review its own records and records of their affiliates to determine whether the consumer has any required payments under debt obligations.  A lender must then make a reasonable determination of the consumer’s net income and major financial obligations, calculate the consumer’s debt-to-income ratio or residual income, estimate the consumer’s living expenses, and determine, based on this information, whether a consumer would be able to make payments under the covered loan and his or her payment obligations and meet his or her basic living expenses.

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