CFPB Issues Final Rule on Small Dollar Lending
Earlier this week, the Consumer Financial Protection Bureau (CFPB) issued its long-awaited small dollar lending rule to preserve consumer access to competition and credit. Upon finding the mandatory underwriting provisions in the 2017 rule insufficient, this final rule rescinds it, but it does not change the payment provisions of the 2017 rule.
“A vibrant and well-functioning financial marketplace is important for consumers to access the financial products they need and ensure they are protected,” said CFPB Director Kathleen L. Kraninger. “Our actions today ensure that consumers have access to credit from a competitive marketplace, have the best information to make informed financial decisions, and retain key protections without hindering that access.”
Consumers have increased options among competing small dollar products, as 32 states currently allow small dollar lending. The CFPB announced that it will begin new research to identify information to disclose to consumers during the small dollar lending process, to better assist them in making an informed decision.
In implementing the payment provisions of the 2017 rule, lenders will be prohibited from making a new attempt to withdraw funds from an account after two failed attempts have been made. Additionally, lenders will be required to provide written notice to consumers of any such attempts.
With the final rule and the ratification of the payments provision, the CFPB also issued guidance to clarify the payments provisions’ capacity in order to help lenders comply with the provisions.
“The Bureau protects consumers from unfair, deceptive, or abusive practices and takes action against companies that break the law,” Kraninger stated. “We will continue to monitor the small dollar lending industry and enforce the law against bad actors.”