Velocity Solutions, the Consumer Financial Protection Bureau issued a final rule concerning payday and small dollar lending to maintain consumer access to credit and competition in the marketplace. The final Payday, Vehicle Title, and Certain High-Cost Installment Loans rule rescinds the mandatory underwriting provisions of the 2017 rule, which required lenders of covered loans to make a reasonable determination of a borrower’s ability to repay.
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“The CFPB has signaled its intention to reopen the rule since Mick Mulvaney took over as Acting Director of the Bureau”
“The CFPB has signaled its intention to reopen the rule since Mick Mulvaney took over as Acting Director of the Bureau,” said Christopher Leonard, Velocity Solutions CEO. “Consumers will need to be more vigilant than ever in selecting short-term liquidity options, to prevent getting themselves into payday loan traps that will make their financial situation even more precarious in these uncertain times.”
Leonard continued, “Because payday lenders now will be able to continue to make harmful loans that disregard whether a consumer can afford to repay the loan and fees, we urge banks and credit unions to take a closer look at adopting loan platforms that offer efficient, compliant and affordable small-dollar, short-term loans.”
In addition to the rule, the CFPB has tried to expand access to credit by encouraging banks and credit unions to offer responsible installment loans or lines of credit for amounts of up to $2,500. In March 2020, the CFPB issued a joint statement with the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency encouraging banks and credit unions to offer responsible small-dollar loans to consumers and small businesses in response to COVID-19.
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