On May 18, 2016, the Consumer Financial Protection Bureau (CFPB) announced that it will hold a field hearing in Kansas City, Missouri, on June 2 regarding small-dollar lending, commonly referred to as payday lending. It is widely speculated that the CFPB will announce the long-awaited payday lending rules, which would be the first federal regulation for this industry, which is currently primarily regulated by the states.
Director Richard Cordray is expected to announce rules, first forecasted in March 2015, requiring lenders to, among other things, undertake more stringent underwriting requirements prior to issuing a short-term loan, and limiting the number of loans a borrower could take out over the course of a year. The new rules will also likely address debt collection practices by lenders, specifically dealing with accessing borrowers’ deposit accounts.
While consumer groups have encouraged the CFPB to issue these rules, both lenders and members of Congress argue that the requirements will result in reducing access to credit for those who are underbanked and lack access to credit cards and bank loans.
Members of the BakerHostetler Financial Services team will be monitoring the field hearing and will provide an update in the coming weeks.