Notice of Proposed Rulemaking on Payday, Vehicle Title, and Certain High-Cost Installment Loans

Pursuant to its authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) (Dodd-Frank Act), including sections 1022, 1024, 1031, and 1032, the Bureau of Consumer Financial Protection (Bureau or CFPB) is proposing to establish 12 CFR part 1041, which would contain regulations creating consumer protections for certain consumer credit products.  The proposal generally would cover two categories of loans.  First, the proposal generally would cover loans with a term of 45 days or less.  Second, the proposal generally would cover loans with a term greater than 45 days, provided that they (1) have an all-in annual percentage rate greater than 36 percent; and (2) either are repaid directly from the consumer’s account or income or are secured by the consumer’s vehicle.  For both categories of covered loans, the proposal would identify it as an abusive and unfair practice for a lender to make a covered loan without reasonably determining that the consumer has the ability to repay the loan.  The proposal generally would require that, before making a covered loan, a lender must reasonably determine that the consumer has the ability to repay the loan.  The proposal also would impose certain restrictions on making covered loans when a consumer has or recently had certain outstanding loans.  The proposal would provide lenders with options to make covered loans without satisfying the ability-to-repay requirements, if those loans meet certain conditions.  The proposal also would identify it as an unfair and abusive practice to attempt to withdraw payment from a consumer’s account for a covered loan after two consecutive payment attempts have failed, unless the lender obtains the consumer’s new and specific authorization to make further withdrawals from the account. The proposal would require lenders to provide certain notices to the consumer before attempting to withdraw payment for a covered loan from the consumer’s account. The proposal would also prescribe processes and criteria for registration of information systems, and requirements for furnishing loan information to and obtaining consumer reports from those registered information systems. The Bureau is proposing to adopt official interpretations to the proposed regulation.

Proposed Rule with Request for Comment

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Issued rule

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Proposed model forms

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