The US Government Consumer Financial Protection Bureau May Scrap Underwriting Requirements For Payday Loans
The Consumer Financial Protection Bureau (CFPB) may scrap some underwriting requirements for payday loans, which would make it easier for payday lenders to provide the loans and easier for some borrowers to procure them. The underwriting requirements in question are part of the CFPB’s payday lending rule, which the bureau spent five years working on and which the last director and the current one, Mick Mulvaney and Kathy Kraninger respectively, seek to backtrack. This part of the rule requires payday lenders to underwrite loans for borrowers who obtain more than six payday loans in a year. Lenders must verify the borrower’s income and examine the borrower’s other debts and spending. In other words, they must evaluate a borrower’s “ability to repay.” The purpose of this provision is to prevent borrowers from falling into a long-term debt trap, as payday loans usually come with interest rates upward of 300 percent. If payday lenders believe a frequent borrower is unable to pay back the loans, they can refuse to provide more of them. Rebecca Borné, senior policy counsel with the Center for Responsible Lending (an anti-payday lending advocacy group), told InsideSources she doesn’t see how nixing this provision will be good for consumers. [as reported in Credit & Collection e-newsletter of 01/17/19]