The CFPB issued a final rule amending regulations on payday, vehicle title, and high-cost installment loans. The amendments follow a CFPB reevaluation of the 2017 final rule. The CFPB is revoking provisions that, among other things:
- deem a lender to be using "unfair and abusive" lending practices if the lender enters into a balloon-payment loan agreement without reasonably determining if the borrower has the ability to repay the loan according to its terms; and
- mandate underwriting requirements when making an ability-to-repay determination, and exempt certain loans from mandatory underwriting requirements.
The revisions will go into effect 90 days after the date of publication in the Federal Register.
In an updated report, the Congressional Research Service summarized the changes the new final rule makes to the 2017 final rule, and analyzed the impact of the revisions focusing primarily on payday lending.
Commentary
Payday loans raise significant ethical questions. Should the government deny or allow low-income individuals access to short-term credit that is expensive? Would it be possible to foster competition in the provision of such credit so that it can be made available on the best possible terms?
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