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Payday loans

Spring 2014 rulemaking agenda

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Today, we’re posting a semi-annual update of our rulemaking agenda in conjunction with a broader initiative led by the Office of Management and Budget (OMB) to publish a Unified Agenda of Regulatory and Deregulatory Actions across the federal government. Portions of the Unified Agenda are published in the Federal Register, and the full set of materials is also available.

Under the Regulatory Flexibility Act, federal agencies are required to publish regulatory agendas twice a year. We’ve been doing this for a couple of years now by voluntarily participating in the Unified Agenda. Our regulatory agenda includes rulemaking actions in the following stages: pre-rule, proposed rule, final rule, long term actions, and completed actions.

Mortgages

Our agenda includes a number of rulemakings mandated by the Dodd-Frank Act. For example, we recently convened a small business review (SBREFA) panel to discuss potential amendments to the Home Mortgage Disclosure Act, some of which were mandated by Section 1094 of the Dodd-Frank Act. We’re also focusing intensely on supporting the implementation process for our recent rulemaking to implement a Dodd-Frank Act directive to consolidate and streamline federal mortgage disclosures required under the Truth in Lending Act and Real Estate Settlement Procedures Act. We’re also continuing work with stakeholders to address questions that have arisen with regard to the 2013 mortgage rules, including issuing additional clarifications and amendments as warranted.

Defining larger participants

We’re also continuing rulemakings to implement our supervisory program for certain nonbank entities by defining “larger participants” in various markets for consumer financial products and services. For example, we’re developing a proposal to identify “larger participants” in the market for auto lending. We’ve previously defined larger participants in the consumer debt collection, credit reporting, and student loan servicing markets and are now in the process of finalizing a rule defining larger participants in the international money transfer market.

Debt collection

We’ve been doing research and outreach to assess issues in various other markets for consumer financial products and services over many months. In November 2013, we issued an advance notice of proposed rulemaking seeking comment, data, and information from the public about debt collection, which is the single biggest source of complaints to the federal government. We received more than 23,000 comments in response to the notice, and in our 2014 annual report on Fair Debt Collection Practices Act, reported that we received more than 30,000 consumer complaints in this area.

Payday loans and prepaid cards

We’re researching and considering whether rulemaking is warranted in the areas of payday and deposit advance products, as well as consumer overdraft products. We held a field hearing in March 2014 in Nashville, Tennessee, and also released a report that analyzed payday lending and found that four out of five payday loans are rolled over or renewed within 14 days. We’re also expecting to build on an Advance Notice of Proposed Rulemaking that we published in 2012 concerning prepaid cards by issuing a proposed rule to strengthen federal consumer protections for these products. We’ve been testing potential disclosures that we may propose to be used on the packaging of prepaid cards.

Privacy disclosures

We’re returning to a topic that had been raised as part of an earlier initiative to seek comment on ways to streamline and modernize regulations that we had inherited from other agencies. Specifically, we are expecting to issue a proposal regarding the notices that consumers receive each year from their financial institutions to explain the companies’ information sharing practices. A number of commenters had suggested that eliminating the annual privacy notices where there has been no change in policies would reduce unwanted paperwork for consumers and unnecessary regulatory burdens, at least where a financial institution limits the sharing of information with third parties.

We’re continuing research, analysis, and outreach on a number of other consumer financial services markets, and will update our next semi-annual agenda to reflect the results of further prioritization and planning.

Update: Save the date, Nashville!

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There’s a lot of interest in our upcoming field hearing on payday loans! We’re changing the location to the Country Music Hall of Fame. The hearing will still take place on Tuesday, March 25 at 11 a.m. CDT. Space is limited, so be sure to RSVP! The event will feature remarks from Director Richard Cordray, as well as testimony from consumer groups, industry representatives, academics, and members of the public.

Country Music Hall of Fame
222 5th Avenue South
Nashville, TN 37203

To RSVP
Email cfpb.events@cfpb.gov with:

  • Your full name
  • Your organizational affiliation (if any)

This event is open to the public. If you need an accommodation to participate, you can make a request.

See you there!

Updated on March 21, 2014: The location of the field hearing has changed and the new address is above.

Our first enforcement action against a payday lender

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Today we’re announcing an enforcement action against payday lender Cash America International, Inc., one of the largest short-term, small-dollar lenders in the country. The company has agreed to reimburse up to $14 million to approximately 14,000 people for robo-signing practices related to debt collection lawsuits. The company will also pay a $5 million penalty for the violations and other misconduct.

Who is eligible for a refund?
You may be eligible for a full refund if you paid money because of a collections lawsuit from January 1, 2008 through October 1, 2012 to any of the following companies:

Ohio Neighborhood Finance, Inc., d/b/a Cashland

Cash America Pawn, Inc. of Ohio

Cashland Financial Services, Inc.

Cash America Net of Ohio, LLC

Ohio Neighborhood Credit Solutions, Inc.

CNU of Ohio, LLC.

If you have not already received your refund, or think you received the wrong amount of refund, please contact the company administering the refund no later than May 19, 2014. You can call them at (877) 524-8480 or find more information on their website: www.voluntaryloanrefundprogram.com

Problem with a payday loan?
You can submit a complaint online or by calling (855) 411-2372.

You can also get clear, unbiased answers to questions about payday loans on Ask CFPB.

What military families should know about payday loans

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Starting today, you can submit payday complaints to us. So this seems a good time to remind you that if you are a servicemember on active duty you, your spouse, and certain dependents have the protection of a special law called the Military Lending Act (MLA). The MLA says that you can’t be charged an annual percentage rate higher than 36 percent on certain types of consumer loans, and that includes certain payday loans as well as auto title loans and tax-refund anticipation loans.

So what exactly is a payday loan? It tends to be a short-term, usually high-cost, cash advance where you pay a fee to borrow money (for example, a $15 fee for every $100 borrowed) and you are expected to pay it back in a short time, usually a couple of weeks. People often tell us that the MLA cap of 36 percent seems like a pretty high limit – but what they don’t realize is that the average annual percentage rate on a payday loan like the one above is 390 percent! And if you roll over the loan repeatedly because you can’t pay it off like you hoped you could, then the cost can skyrocket over time. We’ve seen examples of payday loan borrowers who end up paying far more in fees than the amount they originally borrowed. In some cases they could have gone to one of the military relief societies, if it was an emergency, and gotten a loan at zero percent interest. Yes, zero – no fee at all.

So, the good news is that the MLA provides you protections that the average citizen doesn’t have when it comes to payday loans. And the CFPB is one of several federal agencies that have the power to enforce the MLA. But your complaints are key to helping us enforce it and other consumer financial laws.

You can submit a payday complaint online or by calling (855) 411-2372. Don’t forget to tell us you’re “military” when asked!

Complaints help us spot trends. Submitting a complaint helps us see patterns, focus our resources, and identify the worst actors – so your complaint can make a difference!

You can submit a payday loan complaint

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Payday loans are typically marketed as a way to get quick cash when you need it. They are generally for small amounts due quickly, like on your next payday, and they often give the lender a claim on your bank account. They are sometimes also called cash advance loans.

We’ve heard from people who like the ease of obtaining a payday loan when they need to avoid paying their bills late. Many other people have raised concerns about the high cost of payday loans, not being able to repay the payday loan while still having enough money left for other expenses, and the debt collection practices they encounter if they can’t repay the loan.

Starting today you can submit a complaint if you have a problem with your payday loan. You can submit a complaint about:

  • Unexpected fees or interest
  • Unauthorized or incorrect charges to your bank account
  • Payments not being credited to your loan
  • Problems contacting the lender
  • Receiving a loan you did not apply for
  • Not receiving money after you applied for a loan

You can also get clear, unbiased answers to questions about payday loans on Ask CFPB or by calling (855) 411-2372.

Your complaints help us identify business practices that may pose risks to consumers and we use that information in our work to supervise companies, enforce federal consumer finance laws, and write better rules and regulations.

What is a payday loan?