To help ensure borrowers were not getting sucked in this so-called debt trap, the CFPB finalized a new, multipart payday loan regulation in 2017 that, among other things, required payday lenders to double-check that borrowers could afford to pay back their loan on time by verifying information like incomes, rent and even student loan payments.
The new set of rules were to apply to a wide range of short-term credit products beyond just payday loans, including auto title loans.
To give companies time to adjust, the CFPB originally scheduled the rules to go into effect in August 2019. The Trump administration directed the agency to delay implementation, however, and first conduct another review.
On Wednesday, the CFPB announced that it had finished its review and found the “ability to pay” requirements would restrict access to credit. Therefore, the new leadership at the agency proposed abandoning these safeguards.
In a statement issued Wednesday, the CFPB said its decision is based, in part, over concerns that the verification requirements “would reduce access to credit and competition in states that have determined that it is in their residents’ interests to be able to use such products, subject to state-law limitations.”
The agency said that there was “insufficient evidence and legal support” for the verification requirements, adding that “rescinding this requirement would increase consumer access to credit.”
The CFPB did keep in place restrictions that bar payday lenders from repeatedly trying to directly withdraw payments from a person’s bank account. Some payday lenders attempt to recover their money by taking what they’re owed directly from borrowers’ checking accounts, which borrowers grant access to as a condition of the loan. But unexpected withdrawals from the lender can rack up pricey overdraft fees and damage credit scores.
However, these restrictions won’t take effect until at least November 2020.
from Viral News Updates http://bit.ly/2BkjNni
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