Payday Lending

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Not surprisingly, letters sent to the CFPB this week by New York Financial Services Superintendent Benjamin Lawsky and by 12 House Republicans urge the CFPB to take very different approaches as it considers payday and short-term loan rulemaking.

In their letter, the House Republicans set forth the following five principles which they believe the CFPB should follow in adopting rules for payday and short-term loans:

  • Maintain a data-driven approach in which rulemaking is based on large scale data analysis and tested research, not anecdotal or agenda-driven rhetoric
  • Consider the impact on small businesses that provide access to credit through the use of their own capital and employment opportunities
  • Consider the impact on rural communities which can be disproportionately impacted by overzealous regulations
  • Conduct a qualitative and quantitative cost-benefit analysis
  • Consider state models in states that have passed short-term lending laws

In contrast, Mr.… Continue Reading

As anticipated, the Department of Defense’s proposed regulations to implement provisions of the Military Loan Act added by the 2013 Defense Authorization Bill would significantly expand MLA coverage.  The proposed revisions would limit interest charged to servicemembers and their dependents on all payday loans, vehicle title loans, refund anticipation loans, deposit advance loans, installment loans, unsecured open-end lines of credit, and credit cards and require creditors to screen all applicants against a DoD database before offering such products with rates greater than 36 percent. … Continue Reading

Earlier this month, the CFPB and FTC filed lawsuits against different groups of interrelated companies and their individual principals for engaging in allegedly unlawful online payday lending schemes.

The CFPB’s lawsuit, which the CFPB made public yesterday, was filed under seal on
September 8, 2014 in a Missouri federal court contemporaneously with an ex parte application for a temporary restraining order to halt the defendants’ operation and freeze its assets (which was granted). … Continue Reading

We recently learned that earlier this month, the CFPB sent letters to payday lenders demanding copies of certain of their standard loan agreements for use in connection with the CFPB’s arbitration study.  The letters are accompanied by a CFPB order that orders the lenders to file the agreement with the CFPB. … Continue Reading

In an unexpected move earlier this week, the FDIC issued a Financial Institution Letter announcing that it was withdrawing the list of “risky” merchant categories that was included in prior guidance on account relationships with third-party payment processors.  Among the listed categories were payday loans and money transfer networks.

At the House Financial Services Committee hearing last week on “Operation Choke Point,” committee members voiced industry charges that FDIC examiners have been using the list to intimidate banks into terminating relationships with companies in the listed categories regardless of whether such companies were engaged in legitimate activities and operating lawfully.… Continue Reading

A California federal court recently issued an order granting the CFPB’s petition to enforce its civil investigative demands (CIDs) issued to three tribally-affiliated payday lenders.  However, the court also granted the lenders’ request for a stay pending their appeal to the Ninth Circuit.  Although the CFPB did not oppose the stay, the court nevertheless found that if its decision was wrong, the lenders were likely to suffer irreparable harm because of the disclosure of sensitive proprietary documents to the CFPB whereas the CFPB would not be injured by a temporary delay.… Continue Reading

Two House committees have scheduled hearings this week on “Operation Choke Point,” the coordinated federal multiagency enforcement initiative targeting banks serving online payday lenders and other companies that have raised regulatory concerns. 

Tomorrow, July 15, the House Financial Services Committee will hold a hearing entitled “The Department of Justice’s ‘Operation Choke Point.'” … Continue Reading

Yesterday, the CFPB and ACE Cash Express issued press releases announcing that ACE has entered into a consent order with the CFPB. The consent order addresses ACE’s collection practices and requires ACE to pay $5 million in restitution and another $5 million in civil monetary penalties.

In its consent order, the CFPB criticized ACE for: (1) instances of unfair and deceptive collection calls; (2) an instruction in ACE training manuals for collectors to “create a sense of urgency,” which resulted in actions of ACE collectors the CFPB viewed as “abusive” due to their creation of an “artificial sense of urgency”; (3) a graphic in ACE training materials used during a one-year period ending in September 2011, which the CFPB viewed as encouraging delinquent borrowers to take out new loans from ACE; (4) failure of its compliance monitoring, vendor management, and quality assurance to prevent, identify, or correct instances of misconduct by some third-party debt collectors; and (5) the retention of a third party collection company whose name suggested that attorneys were involved in its collection efforts.… Continue Reading

While Director Cordray’s appearance at the House Financial Services Committee’s hearing on the CFPB’s fifth Semi-Annual Report yesterday was accompanied by the usual dose of political theater, his testimony did yield the following items of noteworthy information: 

  • The CFPB will be issuing a white paper later this summer regarding use of the proxy methodology for identifying discrimination in indirect auto financing. 
… Continue Reading

In the latest semi-annual update of its rulemaking agenda, the CFPB officially confirmed that it plans to propose a rule to define “larger participants of a market for auto lending.”  The official confirmation follows statements made by Steven Antonakes at a Consumer Bankers Association meeting in April 2014 that the CFPB’s next larger participant rule would relate to auto finance. … Continue Reading