Will Installment Loans Get Painted with CFPB's Payday Brush July 7, 2016 American Banker, Kate Berry (July 6, 2016) Installment lenders fear that they may be getting lumped in with payday lenders in the Consumer Financial Protection Bureau’s (CFPB) proposed rule governing small-dollar lending, despite the fact that the product is entirely different. "These are really two different markets -- they're like apples and oranges," said Bill Himpler, executive vice president of legislative affairs at the American Financial Services Association, the trade group for installment and auto finance lenders. "It would be akin to lumping a hamburger joint like McDonald's and Morton's Steakhouse into the same category just because both are restaurants." Though both payday and installment loans are offered by some lenders, there are key differences, mostly in the annual percentage rates charged and in state licensing requirements. The interest rate on many installment loans range from 36% to 100%. Payday loan APR’s can be as high as 350% or more. "Installment loans are a much safer structure," said Martin Eakes, the co-founder and chief executive of Self-Help Credit Union and the Center for Responsible Lending, who has fought battles with payday lenders in Arizona, Colorado, North Carolina, Ohio and Washington. California's Department of Business Oversight released a report last week that showed 55% of all consumer loans valued at $2,500 to $5,000 carried APRs of 100% or more, compared with 58% for those below $2,500. But roughly 40% of the state's 252 payday lenders have dual licenses to offer both types of loans, department spokesman Tom Dresslar said. Unsecured consumer loans in California jumped 40% jump to $5.6 billion in 2015. The centerpiece of the CFPB's plan is a requirement that encourages lenders to verify a borrower's ability to repay a loan and not have to reborrow within the next 30 days and still meet living expenses. But that is where the options provided to both payday and installment lenders end. Installment lenders could opt to originate loans under the option that allows for an all-in cost of 36%, Himpler said, but the total loan amount would have to be $2,500 or higher to justify the costs. "The CFPB plan is based on data that is pertinent to payday lenders with APRs in excess of 200% and no underwriting, and default rates of 30% to 40%," Himpler said. "That's not us. Our guys want to stay in business."