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Bureau finalizes payday loan rule

The CFPB has announced it has approved a final rule to establish regulations at 12 CFR part 1041 (Regulation OO?) titled "Payday, Vehicle Title, and Certain High-Cost Installment Loans." The rule, which will be effective 21 months after publication in the Federal Register, applies to two types of covered loans (with several exceptions):

  • Short-term loans with terms of 45 days or less, including typical 14-day and 30-day payday loans, short-term vehicle title loans usually made for 30-day terms, and longer-term balloon-payment loans. These loans will be subject to underwriting requirements.
  • Longer-term loans with terms of more than 45 days, with both a cost of credit exceeding 36 percent per year and a form of "leveraged payment mechnism" giving the lender a right to withdraw payments from the consumer's account.

Both types of covered loans will be subject to restrictions on multiple attempts to withdraw payments from a consumer's account without the consumer's new and specific authorization, and subject to requirements for advance notice of some such attempts. The rule also provides for the establishment of "registered information systems" (special-purpose credit reporting agencies) to which information about covered loans will be furnished, and from which lenders will obtain information to be used in underwriting of certain short-term loans.

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