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CBA Comment Letter re RFI to Assist the Taskforce on Federal Consumer Financial Law
Re: Bureau of Consumer Financial Protection Request for Information to assist the Taskforce on Federal Consumer Financial Law, Docket No. CFPB-2020-0013.
The Consumer Bankers Association (CBA) appreciates the Consumer Financial Protection Bureau (Bureau) issuing its Request for Information to assist the Taskforce on Federal Consumer Financial Law (RFI). CBA feels the Taskforce on Consumer Financial Law (Taskforce) and this RFI present a unique opportunity for the Bureau to better understand the implications of its various legal and regulatory proceedings on all interested stakeholders.
CBA also values the various opportunities for stakeholder engagement, including this RFI process, and the series of Requests for Information issued by the Bureau in 2018. CBA participated fully with the 2018 Requests for Information, and summaries of our comments in that forum can be found below.
In addition to the issues highlighted in CBA’s comments to the 2018 Requests for Information, we once again raise the following issues as priorities for consideration by the Taskforce.
- Top Rulemakings for Reform
CBA appreciates the Taskforce’s commitment to reviewing the Bureau’s various rulemaking responsibilities and determining where the Bureau should act to effectuate better policy to protect consumers. CBA outlined specific concerns with many of the Bureau’s inherited and adopted regulations during the Bureau’s 2018 Requests for Information. In addition to those concerns, which address much of the Taskforce’s RFI, we highlight the following rules as priorities for reform and further rulemaking.
- Clarify What Products Qualify Under the Bureau’s Small Dollar Rule
In 2019, the Bureau issued a proposed rule to revise its November 2017 small-dollar loan rule (2017 Rule). The proposal would effectively rescind the 2017 Rule’s requirement that lenders determine a borrower’s ability to repay prior to extending small-dollar and certain other types of covered loans. The Bureau has also finalized a delay of the compliance date for the 2017 Rule’s existing ability to repay provisions to November 19, 2020. According to the proposal, the Bureau believes the 2017 Rule’s ability to repay provisions would have the effect of eliminating lenders willing to participate in the market, thereby decreasing consumer access to credit and competition in credit markets. We agree with the Bureau’s assessment of the 2017 rule and applaud the proposal that will help depository institutions offer short term credit products.
The proposed rescissions would substantially decrease the significant burdens on lenders that would be imposed by the existing ability to repay requirement. The 2017 Rule would require lenders to obtain extensive information about a consumer’s finances and use the information to project whether the consumer will be able to make payments for his or her existing payment obligations and the payments under the covered loan and still meet basic living expenses for a period of thirty days. The changes in the proposed rule may encourage lenders previously discouraged by the requirements under the 2017 Rule to engage in small-dollar, short-term loans.
Lenders would still be subject to the 2017 Rule’s payment provisions, which require a lender to obtain a new customer authorization to attempt to withdraw funds from a consumer’s account following two consecutive failed attempts to withdraw payments from that account. The provisions also require lenders to provide consumers with a written notice prior to a first attempt to withdraw payment from a checking, savings, or prepaid account and before subsequent attempts to withdraw payments if the payment amounts, dates, or payment channels differ from the first attempt.
In May, the Bureau released a No Action Letter (NAL) template through its Office of Innovation designed to create a pathway for financial institutions looking to offer small-dollar, short term loans. The NAL template followed earlier statements by the Bureau encouraging financial institutions to offer these products in response to COVID-19. While CBA appreciates these steps to open the small dollar market, we still feel a formal rulemaking on small-dollar short term loans is necessary.