CFPB Proposes to Eliminate Small-Dollar Lending Rule’s Ability-to-Repay Test

The Consumer Financial Protection Bureau yesterday proposed to remove the prescriptive underwriting provisions from the small-dollar lending rule it issued in October 2017. The rule imposes an ability-to-pay test on a wide swath of small-dollar loans of 45 days or less, including payday loans, auto title loans and bank-provided loans with balloon payments. 

The CFPB’s proposal maintains the complete exemption in the rule 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 less than 10 percent of revenues.

The CFPB also proposed to extend the compliance date for the rule’s underwriting provisions by 15 months to Nov. 19, 2020. This extension is intended help lenders avoid expending unnecessary resources to comply with provisions that the CFPB has proposed to rescind. Read the proposal.