In remarks earlier this week to the National Credit Union Association, Director Cordray discussed the proposals the CFPB is considering for small dollar loans. In March 2015, in anticipation of convening a SBREFA panel, the CFPB issued an outline of the proposals it was considering for payday (and other small-dollar, high-rate) loans (“Covered Loans”). For both “short-term” Covered Loans and those considered to be “longer-term” under the proposals, lenders would be allowed to make Covered Loans using either an ability-to-repay (ATR) analysis or without an ATR analysis but subject to significant restrictions.
Director Cordray indicated in his remarks only that the CFPB is continuing to consider giving lenders ATR and non-ATR options and revealed no changes in the CFPB’s approach to Covered Loans from that outlined to the SBREFA panel. As we commented in our blogs about the CFPB’s proposals for both “short-term” and “longer-term” loans, those proposals are seriously flawed. In formulating its proposal, we hope the CFPB is giving due consideration to the input it received from the small entity representatives (SER) on the SBREFA panel which met in April 2015. The SERs included online lenders, brick-and-mortar payday and title lenders, tribal lenders, credit unions and small banks.
With regard to the non-ATR option in particular, Director Cordray indicated in his remarks that the option is intended to “help open access to credit to consumers with a genuine borrowing need while still protecting consumers against getting stuck in long-term debt traps.” As we noted in our blogs, the significant restrictions attached to the non-ATR option in the CFPB’s SBREFA outline makes it plainly inadequate. Without changes to the non-ATR option, it will not serve the CFPB’s goal to “open access to credit to consumers.”