The CFPB Issued a Final Rule for Payday, Vehicle Title, and Certain High-Cost Installment Loans

CFPB Final rule- Payday, Vehicle Title, and Certain High-Cost Installment Loans

The Consumer Financial Protection Bureau (“CFPB”) has implemented a final rule aimed at enhancing consumer protections for payday loans, vehicle title loans, and certain high-cost installment loans. The rule addresses two main concerns: first, it prohibits lenders from issuing loans without reasonably determining that consumers can repay them according to their terms, particularly for loans with balloon payments. Second, it restricts lenders from attempting to withdraw payments from consumers' accounts after two consecutive failed attempts without obtaining new authorization.

The CFPB has exempted certain short-term loans from the strict ability-to-repay requirements if they include specified consumer safeguards. Additionally, lenders must provide clear notices to consumers before attempting to withdraw funds for covered loans. Originally proposed in 2019, the rule has undergone updates and compliance date extensions to address industry feedback and ensure effective implementation of its provisions.

For more information, see here:  https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/payday-vehicle-title-and-certain-high-cost-installment-loans/

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