Laura Udis, the CFPB’s program manager for the payday lending industry, spoke on April 10 in Los Angeles on a panel sponsored by the American Bar Association Consumer Financial Services Committee. CFPB staff members are generally somewhat constrained in commenting on future CFPB actions. However, Ms. Udis advised that, in its rule-making, the CFPB may take a look at required payment plans, databases and multiple loan limits.
Quoting Director Cordray’s promise that the CFPB would be “grappling with all aspects of this issue,” Ms. Udis also advised that the CFPB might consider imposing: (1) disclosure requirements concerning the likelihood of loan renewals (something Texas has done); (2) longer repayment periods (something Colorado did under Ms. Udis’ direction); and (3) different approaches to underwriting, including required analysis of ability to repay without re-borrowing and refinancing, loan to income limits and payment to income limits.
Hilary Miller, a leading industry lawyer, commented that, in threatening to move forward with rule-making soon, the CFPB is presuming that sustained use of payday loans harms consumers. He noted that, to date, the CFPB has adduced no evidence of harm. Certainly, Ms. Udis did not point to any such evidence. Ms. Udis was unable to advise whether (or when) the CFPB would release results of its online payday loan study. This study was designed to pair online payday lending data with consumer financial health outcomes. Of course, this is exactly the kind of study that could demonstrate consumer injury from payday lending —if, in fact, there is any measurable injury.
Whatever the ultimate form CFPB rule-making may take, it seems likely that rules will not become effective this year. Ms. Udis agreed with one questioner that the CFPB would need to convene panels under the Small Business Regulatory Enforcement Fairness Act before finalizing any rules. As previously reported by my colleague Glen Trudel, the need to comply with SBREFA will delay rule-making many months.