The Consumer Financial Protection Bureau (CFPB) announced it will not prioritize enforcement or supervisory actions with respect to certain aspects of its final rule regulating payday, vehicle title, and certain high-cost installment loans.
The CFPB further stated it is “contemplating issuing a notice of proposed rulemaking to narrow the scope of the rule.”
Specifically, the bureau said it will not actively pursue penalties and fines pertaining to the rule’s “payment disclosure” provision that became operative on March 30. This provision required covered entities to provide “clear and conspicuous” disclosures of payment transfer attempts “in a form that can be viewed on paper or a screen, as applicable,” among other requirements.
The rule includes a complete exemption for banks and other depository institutions that made 2,500 or fewer small-dollar loans in each of the current and previous years and for which these loans account for no more than 10 percent of revenues. The American Bankers Association and other financial services trade organizations advocated for this provision to protect banks’ flexibility to serve their customers’ small-dollar credit needs.
Rather than payday lending rule actions, the CFPB said it will instead “keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans.”
The CFPB issued its final rule on payday lending in October 2017, under former CFPB Director Kathy Kraninger. The finalized version of the rule was absent a provision imposing underwriting standards on payday loans that had been included in a proposed version of the rule but retained the provision on payment disclosures.
Consumer advocacy groups, who pushed back against the decision to eliminate the rule’s underwriting requirements, have condemned the bureau’s latest announcement regarding the payment disclosures provision.
“The CFPB has sided with bottom-feeder payday lenders at the expense of vulnerable borrowers struggling to make ends meet,” Consumer Federation of America Financial Services Director Adam Rust said in a statement. “The CFPB is designed to be a law enforcement agency. A policy of ‘hear no evil, see no evil, punish no evil’ is a sure-fire way to promote lawless behavior.”