Today, January 16, 2018, officially marks the effective date of the Consumer Financial Protection Bureau’s final rule targeting what it refers to as “payday debt traps” (the “Rule”). As outlined in our previous publications (found here and here), the Rule marks a significant change in the landscape for lenders offering short-term loans or longer-term loans with balloon payments, including payday and vehicle title loans. Looming large is the new requirement that lenders determine a borrower’s ability to repay prior to originating covered loans.
As of today, 60 days following publication of the Rule in the Federal Register, the Rule is a “go” and industry participants are now on the clock, with April 2018 deadlines for certain registered information systems requirements and an August 2019 compliance deadline on the horizon. And it will likely take industry participants every bit of that time to build the infrastructure and implement the policies and procedures necessary to get into compliance with what is a new frontier for lenders in this space.
But not so fast. While the Rule is now effective, there remain a number of legislative session days for Congress to repeal the Rule under the Congressional Review Act (“CRA”). A bipartisan joint resolution to overrule the Rule was introduced in the House of Representatives in early December to do just that, but has been sitting in the House Committee on Financial Services since, with no action to date. Under the CRA, Congress generally has 60 legislative days (i.e., days when Congress is actually in session) from when the Rule is transmitted to Congress to pass the joint resolution to repeal the Rule (“60-day rule”). With the Rule’s publication on November 17, 2017, applying this 60-day rule, Congress’ opportunity to repeal the Rule under the CRA is expected to expire sometime in March 2018.
As discussions on this issue progress, interested stakeholders may want to engage in order to achieve their particular policy objectives. Stay tuned as we continue to monitor the status of the Rule.