Advocacy by Small Dollar Lending Industry Bears Fruit on CFPB Rule October 12, 2017 AFSA Staff Last week the Consumer Financial Protection Bureau (CFPB) released its final rule on payday, title and certain high-cost installment loans. The association reviewed the rule and noted how very different it is from the proposed rule, which was published in the Federal Register in July of 2016. The proposed rule was burdensome, inflexible and generally did not recognize the valuable role that legitimate small dollar credit options play in the lives of American consumers. AFSA and its members submitted a variety of comments to and worked with the bureau to illustrate this value. It is clear from the final rule that the CFPB took these comments seriously. The final rule applies only to two types of loans: Short-term loans that have terms of 45 days or less; and Longer-term, balloon-payment loans where the consumer is required to repay the entire balance, or substantially the entire amount, of a single advance more than 45 days after consummation in either a single payment or through at least one payment that is more than twice as large as any other payment. A third type of loan, which the rule refers to as a covered longer-term loan, is subject only to the rule’s requirements concerning payments. Covered longer-term loans are not subject to the ability-to-repay portions of the rule. AFSA has found that some installment loans may meet the definition of this type of covered longer-term loan. A covered longer-term loan is defined as a loan with a term of more than 45 days that has: (1) a cost of credit that exceeds 36 percent per annum; and (2) a form of “leveraged payment mechanism” that gives the lender a right to withdraw payments from the consumer’s account. The final rule showed that the efforts of AFSA and its members were effective. The bureau wrote, “Given that covered longer-term loans are only subject to the payment requirements in subpart C, and in view of the comments received, the Bureau concludes that the advantages of simplicity and consistency militate in favor of adopting an APR threshold as the measure of the cost of credit, which is widely accepted and built into many State laws, and which is the cost that will be disclosed to consumers under Regulation Z.” The Bureau added that, “…the Regulation Z definition of cost of credit would be simpler and easier to use…” And the Bureau concluded that, “…defining the term cost of credit consistently with Regulation Z would reduce the risk of confusion among consumers, industry, and regulators. It also reduces burden and avoids undue complexities…” AFSA will continue working closely with the bureau as it works to implement the rule.