CFPB Proposes Underwriting And Payment Processing Requirements For Payday, Title, And High-Rate Installment Loans

On June 2, 2016, the CFPB proposed new ability-to-repay and payment processing requirements for short-term and certain longer-term consumer loans. Relying largely on the CFPB's authority to prohibit unfair or abusive practices, the proposal would generally require that lenders making payday, vehicle title, and certain high-rate installment loans either originate loans satisfying strict product characteristic limitations set by the rule or make an ability-to-repay determination based on verified income and other information.

To facilitate the ability-to-repay determination, the CFPB is also proposing to establish special "registered information systems" to which lenders would have to report information about these loans. In addition, servicers would have to obtain new payment authorizations from consumers after making two consecutive unsuccessful attempts at extracting payment from consumer accounts, and would be subject to new disclosure requirements related