THE BLOG

06
Feb

CFPB Proposed “Payday Loan Ability to Repay Rule” Rescind: Great News

The CFPB issued a positive press release today regarding the payday loan industry.

Consumers, lenders, employees, property owners, tax revenue, deregulation, competition… ALL WINNERS!

Washington, D.C. — The Consumer Financial Protection Bureau today is proposing to rescind certain provisions of its 2017 final rule governing “Payday, Vehicle Title, and Certain High-Cost Installment Loans.” Specifically, the Bureau is proposing to rescind the rule’s requirements that lenders make certain underwriting determinations before issuing payday, single-payment vehicle title, and longer-term balloon payment loans. The Bureau is preliminarily finding that rescinding this requirement would increase consumer access to credit.

In October 2018, under the leadership of then-Acting Director Mulvaney, the Bureau announced that it would issue Notice of Proposed Rulemakings (NPRMs) to reconsider the rule’s mandatory underwriting requirements and to address the rule’s compliance date. The proposals the Bureau is releasing today fulfill that commitment.

The Bureau’s proposal suggests there was insufficient evidence and legal support for the mandatory underwriting provisions in the 2017 final rule. Additionally, the Bureau is concerned that these provisions would reduce access to credit and competition in states that have determined that it is in their residents’ interests to be able to use such products, subject to state-law limitations. The NPRM proposing to rescind the mandatory underwriting requirement is open to public comment for 90 days.

In a separate notice issued today, the Bureau is also proposing to delay the August 19, 2019 compliance date for the mandatory underwriting provisions of the 2017 final rule to November 19, 2020. The NPRM proposing the delay is open to public comment for 30 days.

Today’s NPRMs do not propose to reconsider the provisions of the 2017 final rule governing payments, including reconsidering the scope of their coverage.  The payment provisions prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals. The payment provisions also require such lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels. These provisions are intended to increase consumer protections from harm associated with lenders’ payment practices.

“The Bureau will evaluate the comments, weigh the evidence, and then make its decision,” said Kathy Kraninger, Director of the Consumer Financial Protection Bureau. “In the meantime, I look forward to working with fellow state and federal regulators to enforce the law against bad actors and encourage robust market competition to improve access, quality, and cost of credit for consumers.”

The NPRMs can be viewed here: https://files.consumerfinance.gov/f/documents/cfpb_payday_nprm-2019-reconsideration.pdf  and https://files.consumerfinance.gov/f/documents/cfpb_payday_nprm-2019-delay.pdf

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24
Jan

Payday Loans: Good News Continues – CFPB & Payday Loan Ability to Repay Analysis

Payday Loans: Continued Good News for Consumers & Lenders!

WHAT IT IS

Ronald Mann, a Columbia University law professor was hired by our industry to survey 1000 payday loan borrowers.

The question put to our customers? How accurately could they estimate how long it would take the borrower to pay us back and how well the borrower understood our loan product.

No hand cuffs were put on the professor.

Payment to him did not hinge on his findings.

The results of this study per Professor Mann?

WHAT THIS MEANS

Mann said, “That while many borrowers are desperate for cash, they understand the cost of the loans, which typically charge an upfront fee of roughly $15 for every $100 borrowed.”
“The problem isn’t that payday loans are expensive, it’s that we live in a capitalistic society and don’t have a safety net, and lots of people make less than other people and can’t make ends meet,” he said.

Why all the hullabaloo?

Depending on the agenda of the reviewer of his findings, Professor Mann’s 2012 study strongly suggests that underwriting standards are often not necessary. Then again, in other circumstances thay maybe. “The relevant policy question is whether borrowers, deciding to start borrowing from a payday lender, understand what will happen to them,” said Mann in an interview.

The CFPB – Consumer Financial Protection Bureau referred to Mann’s research 30+ times in their effort to place new, crazy restrictions on payday loans, title loans… small dollar loan products.

Ironically, the recently appointed CFPB Director K. Kraninger and her Team are using this same study produced by Professor Mann to refute the attempt by Richard Cordray – previous administartions head of the CFPB – to constrict loan offerings to sub-prime, cash strapped consumers

Interestingly, Professor Mann argued how the CFPB, under former Obama-appointed Director Richard Cordray, interpreted his research, suggesting that “the current rule overemphasized cases where consumers borrowed beyond their means.”

The study revealed that 60% of first-time payday loan borrowers accurately predicted within two weeks when they could repay a small-dollar loan. But it also indicated that in many cases the flip side was true — that 40% of borrowers had no idea when they were going to pay back a loan.

WHY IT’S IMPORTANT: TRENDS

Today, the new CFPB is using this study to undermine Richard Cordray’s craziness. The study seems to strongly suggest that consumers can reliably predict when they can pay back the small dollar loan lender and thus no “ability to repay” determination is required!

In court documents, the CFPB under former acting Director Mick Mulvaney cited Mann’s study as a key piece of evidence in support of “revisiting” the underwriting requirements in the payday rule.

Last year, Mulvaney sided with two payday loan trade groups suing the CFPB to invalidate the rule, which relies on federal law banning “unfair” and “abusive” practices.

Citing Mann’s study, today’s CFPB advocates that our payday loan industry trade groups HAVE presented “a substantial case” demonstrating that most payday loan borrowers DO KNOW “what they’re getting into when they take out a payday loan.”

A judge recently agreed to delay the compliance deadline for when much of the Cordray rule will take effect to give the bureau time to propose and finalize a revamp.

“Basically the only thing that has changed the Bureau’s analysis is the people doing the analyzing.”

So, what’s the premise of our new CFPB to throw out the “ability to repay” analysis requirement? “If borrowers understand the product, then it cannot be abusive. Elements of abusive include “a lack of understanding on the part of the consumer of the material risks, costs, or conditions” of the loans as well as “the inability of the consumer to protect the interests of the consumer in selecting or using” the loans.

Again, according to who interprets Professor Mann’s study, it can be concluded that our consumer understands our payday loan product and “what can happen to them if they do not repay their loan.”

So… our products and processes are not unfair or abusive.

From Professor Mann: “The premise of the rule was that so few people understand that they are going to roll the loans over a lot that the product is unfair and abusive. That’s the real difficulty. It’s difficult to regulate out of existence a consumer finance product because some percentage of people don’t understand how the product works.”

“The funding came from an industry trade association, which hoped that the study would produce favorable findings, but the arrangement, as always, was that I could publish whatever I wanted whether the results struck them as good or bad,” Mann said. “There was not really any relationship with the payday lender.”

BOTTOM LINE

This “ability to repay” analysis WAS a big, black, ugly cloud hanging over our industry!

Sure, maybe some lawyers, lobbyists and more than a few vendors serving “The BUSINESS of LENDING MONEY to the MASSES” would bill for more hours.

THE WORST CASE SCENARIO

Our customers would have zero ability to get a few hundred dollars in their hand to pay an emergency bill, get their prescription filled, keep the lights on and avoid reconnection fees, pay their traffic ticket, fix their car to keep their job…

SMB’s all over America would shut down, jobs lost, landlords vacancy rates climb…

Banks & credit unions want NSF fees! They do not want to go through the hassle of lending $300 to “the masses.”

What do YOU think? Email: Jer@PaydayLoanIndustryBlog.com

Payday Loans, Car Title Loans, installment loans, signature loans

How to Lend Money to the Masses

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08
Nov

Great News: CFPB Payday Loan Lending Rule Stayed! Opportunities Abundant

Consumers WIN BIG! CFPB payday loan rule shut down!! And DEALS/OPPORTUNITIES are immense today.

Frankly, there has never been a better time to be “lending money to the masses.”

  • Demand for credit by borrowers is huge.
  • Stats are all over the map – depending on the source – but something like 60% of US households do not have access to $1000 cash in an emergency.
  • The big sub-prime lending season is almost upon us.
  • Jobs and ability to pay us back are through the roof.
  • Consumer optimism is sky high.
  • Washington D.C is not likely to devise too many roadblocks that could stifle all this enthusiasm.

THE BIG NEWS TODAY?

U.S. District Judge Lee Yeakel reversed a previous order and grantedContinue Reading..

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31
Oct

The CFPB- Like Giving Whiskey & Car Keys to Teenagers – More Good News for Lenders

Giving money and power to government is like giving whiskey and car keys to teenage boys. [P.J. O’Rourke.]

It’s a fact that things are looking really good for those of us who make it our “business to lend money to the masses!”

Yeah, it’s competitive out there! Yep, there is a lot of fraud. FTD [first time defaults] are scaling up.

CAC ‘s are on the increase. Elevate revealed a funded loan costs them $225 each. Enova is close. On the other hand, we have portfolios with <$80 CAC’s and <12% FTPD’s.

The economy is blazing along, average folks feel good about Continue Reading..

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14
Dec

CFPB Employee Files Whistle Blower Charges: Payday Lender Ace Cash Express $10M Fine Bogus

A former CFPB examiner filed whistle blower charges against her employer, the CFPB, claiming she was terminated for refusing to falsify ACE Cash Express documents that resulted in a $10,000,000 fine levied against Ace!

The CFPB continues to be revealed as a reprehensible, rogue government organization whose management enabled their personal prejudices to attempt to destroy lawful, private and publicly traded businesses.

Cassandra Jackson, a former CFPB employee, filed documents strongly indicating she was fired for attempting to report that Ace Cash Express was adhering to CFPB rules and regulations.

It’s common knowledge that Ace Cash Express chose to pay the $10M fine rather than enter into costly, lengthy legal challenges against the one governmental agency having unfathomable deep pockets.

Ms. Jackson also asserts that she “encountered widespread racism and gender discrimination from management” and was eventually forced out due to an “incredibly hostile work environment.”

Jackson said her superiors at the CFPB insisted she falsify documents while she investigated Texas-based payday lender, Ace Cash Express.

Jackson said “she was asked to remove document evidence proving that Ace Cash Express adhered to CFPB regulations and her superiors insisted she write a report including findings she knew to be “false and fabricated.”

“I was specifically told to cite Ace Cash Express for a violation for which I had verified the company was in compliance and to state that Ace Cash Express did not provide, and that the CFPB did not receive, documents that would have satisfied the CFPB’s guidelines, despite having received that information from Ace Cash Express,” Jackson said.

Cassandra Jackson, a former CFPB employee, filed documents strongly indicating she was fired for attempting to report that Ace Cash Express was adhering to CFPB rules and regulations.

Cassandra Jackson, a former CFPB employee, filed documents strongly indicating she was fired for attempting to report that Ace Cash Express was adhering to CFPB rules and regulations.

 

CFPB Employee Files Whistle Blower Charges: Payday Lender Ace Cash Express $10M Fine Bogus

CFPB Employee Files Whistle Blower Charges: Payday Lender Ace Cash Express $10M Fine Bogus

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