According to a Wall Street Journal article published this past weekend, “people familiar with the matter” are reporting that the CFPB’s final payday loan rule will be narrower in its coverage than the CFPB’s proposed rule.
The CFPB’s proposal established limitations for a “covered loan” which could be either (1) any short-term consumer loan with a term of 45 days or less; or (2) a longer-term loan with a term of more than 45 days where (i) the total cost of credit exceeds an annual rate of 36%, and (ii) the lender obtains either a lien or other security interest in the consumer’s vehicle or a form of “leveraged payment mechanism” giving the lender a right to initiate transfers from the consumer’s account or obtain payment through a payroll deduction or other direct access to the consumer’s paycheck. The proposal excluded from coverage purchase-money credit secured solely by the car or other consumer goods purchased, real property or dwelling-secured credit if the lien is recorded or perfected, credit cards, student loans, non-recourse pawn loans, overdraft services and overdraft lines of credit, and apparently credit sale contracts.
According to the WSJ article, the final rule is expected to cover only short-terms loans with a term of less than 45 days (presumably subject to the same exclusions contained in the proposal). The article indicated that the final rule is now undergoing a peer review by other agencies, including the OCC and FDIC, with an early September deadline for completion. It also reported that a CFPB spokesman indicated that the CFPB is “nearing the end of its rule-making process.”