Federal Regulator Voices Support for CFPB’s Proposal on Small-Dollar Rule
Earlier today, the Comptroller of the Currency Joseph Otting voiced his support for the Consumer Financial Protection Bureau’s (CFPB) proposal to rescind the ability-to-repay requirements under its Final Rule regarding “Payday, Vehicle Title, and Certain High-Cost Installment Loans.”
“On February 6, 2019, the [CFPB] took an important and courageous step that will allow banks and other responsible lenders to again help consumers meet their short-term small-dollar needs,” said Otting. “Banks may not be able to serve all of this large market, but they can reach a significant portion of it and bring additional options and more competition to the marketplace while delivering safe, fair, and affordable products that promote the long-term financial goals of their customers.”
Comptroller Otting has been a big advocate of making it easier for banks to get involved in small-dollar short-term lending. Just last summer, the Office of the Comptroller of the Currency (OCC) reversed an earlier directive that instructed banks to avoid such loans and instead encouraged banks to work with consumers who may have “weaker credit histories” yet still have the ability to repay.
In addition to the OCC, banks have voiced their support for CFPB’s proposed rule. “Many consumers rely on small-dollar loans, and regulators and others widely agree that banks are an important source of fair and convenient small-dollar credit,” said Virginia O’Neill, senior vice president of the American Bankers Association. “We are encouraged that the proposal eliminates burdensome and prescriptive underwriting requirements, and that it maintains the exemption for depository institutions that make small-dollar ‘accommodation loans’ to meet the short-term credit needs of their customers.”
CFPB’s proposed rule also garnered support from credit unions. “Credit unions are known for providing safe and affordable short-term, small-dollar loans designed to keep members away from predatory payday lenders and debt traps,” said Ryan Donovan, chief advocacy officer of the Credit Union Association. “We support bureau efforts to revise this rule, and urge the bureau to ensure these changes do not inhibit credit unions participating in the short-term, small-dollar loan market.”