New CFPB small entity compliance guide shares guidance on “payday” rule
Thursday, February 28, 2019
The CFPB recently released a small entity compliance guide for the new “payday” rule also known as the short-term, small-dollar loan rule. The guide underlines information that may be helpful when implementing the payment-related questions of the rule, but be advised: it’s not a substitute for thoroughly reading the rule itself.
Read the full rule here.
Here are a few points to be aware of in this new rule:
I. The rule applies to lenders that make “covered loans” as that term is defined in the rule. Generally, covered loans include:
- Covered short-term loans that require repayment within 45 days of consummation or an advance. Such loans are covered loans regardless of the cost of credit;
- Covered longer-term loans that have certain types of balloon-payment structures. These loans are also covered loans regardless of the cost of credit; and
- Covered longer-term loans that have a cost of credit exceeding a 36 annual percentage rate (APR) and that have a leveraged payment mechanism giving the lender the right to initiate transfers from the consumer’s account without further action by the consumer.
II. The payday lending rule does exempt alternative loans that generally conform to NCUA’s requirements for the Payday Alternative Loan program.
III. The Payday Lending Rule’s payment provisions impose two types of requirements regarding lenders’ repeated attempts to withdraw payments from consumers’ accounts after prior attempts have failed due to insufficient funds.
IV. A lender making a covered loan must develop and follow written policies and procedures designed to ensure compliance with the rule, and must also retain evidence of compliance for 36 months.
For further discussion or questions on this rule or other compliance matters, join the CCUL Risk Management Resources’ Compliance Community on CUNA’s website.