By: Linda L. Goodman
The deadline for payday lenders to begin complying with the underwriting requirements of the new payday rule has been extended by the Consumer Financial Protection Bureau (“CFPB”) so that the agency can begin a reconsideration process on the controversial rule.
The new compliance date is now set for November 19,2020. The agency finalized the rule in 2017 and had set the original compliance date for August of 2019 but have recently said that it now has doubts about the evidence cited as justification for the provisions when the payday rule was originally finalized.
The controversial underwriting provisions, which would require payday lenders to vet borrowers for their ability to repay the loans, has become a highly debated issue with both consumer advocate groups and the payday lenders.
The argument of the consumer advocate groups is that the new compliance underwriting rule is essential to avoiding harm to consumers from high-cost lending.
The payday lenders argue that the new compliance underwriting rule would be over burdensome, costly and would restrict consumers from access to credit.
The CFPB is sticking by their decision to delay the underwriting requirement, saying “If an agency has offered a strong and reasoned basis for reconsideration, and seeks delay to provide for an opportunity for notice and comment on the reconsideration of the underlying regulation before significant costs associated with compliance are incurred, such reconsideration of an existing regulation is an appropriate grounds to delay a compliance date — at least where, as here, there would be potentially market-altering effects, some of which may be irreversible, absent a delay.”
It will be interesting to see this issue unfold and to see how the CFPB handles the payday rule with regard to consumer’s and the payday industry.
For more information and to view the final rule and press release go to the CFPB’s website here: https://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/payday-vehicle-title-and-certain-high-cost-installment-loans-delay-compliance-date-correcting-amendments/ and here: https://www.consumerfinance.gov/.
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This article was originally posted on Cliclaw.com as part of my ongoing efforts to share valuable legal insights. I regularly contribute guest blogs to leading websites in the field of internet compliance. In these posts, I cover a range of topics to help businesses stay compliant in the ever-evolving digital world. You can read my latest guest contributions on Cliclaw.com.
This article is a publication of The Goodman Law Firm and is intended to provide information on recent legal developments. This article does not create an attorney-client relationship, nor should it be construed as legal advice or an opinion on specific situations. This may constitute “Attorney Advertising” under the Rules of Professional Conduct and under the law of other jurisdictions.
Linda L. Goodman is the founder of The Goodman Law Firm, concentrating its practice in internet business and law. Her firm’s clients include Advertisers, Affiliates, Affiliate Networks, and ISP’s.
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