The CFPB has issued a final rule concerning small dollar lending, rescinding the mandatory underwriting provisions of the 2017 rule after the agency re-evaluated the legal and evidentiary bases for the provisions of the rule, according to a Tuesday press release.
The final rule, which was issued “in order to maintain consumer access to credit and competition in the marketplace,” does not rescind or alter the payments provisions of the 2017 rule.
According to the press release, the agency adopted the new rule “because of the insufficient legal and evidentiary bases for the 2017 rule’s mandatory underwriting provisions,” and states it will help to ensure the continued availability of small dollar lending products for consumers who demand them, including those who may have a particular need for such products as a result of the current pandemic.
Further, CFPB says it is moving forward with implementing the payments provisions of the 2017 final rule and that the provisions prohibit lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals.
“The payment provisions also require such lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels,” the press release states. “These provisions are intended to increase consumer protections from harm associated with lenders’ payment practices.”
The press release also states that in May, the agency issued a no action letter template that insured depository institutions and credit unions could use to apply for a NAL covering small dollar credit products.
The final rule can be viewed by clicking here. The ratification of payment provisions can be viewed by clicking here.