The Consumer Financial Protection Bureau is expected to eliminate underwriting requirements in a highly anticipated revamp of its payday lending rule, according to sources familiar with the bureau’s proposal.
The CFPB in October signaled its interest in "revisiting" the ability-to-repay provisions in the 2017 small-dollar lending rule issued under former Director Richard Cordray.
But sources familiar with the agency's thinking say the CFPB—now led by Trump appointee Kathy Kraninger—has concluded the best approach is to remove those provisions altogether. Under the current rule, which has not yet gone fully into effect, lenders must verify a borrower's income as well as debts and other spending, to assess one's ability to repay credit while meeting living expenses.
Such a course would gut the centerpiece of a rule that consumer advocates had hailed as a preventive measure against spiraling debt for consumers who rely on short-term credit.
The agency under then-acting CFPB Director Mick Mulvaney signaled its intent to reopen the rule as far back as Jan. 2018. Now the acting White House chief of staff, Mulvaney sided with two payday lending trade groups that sued the CFPB in April to invalidate the regulatory restrictions.
Read more in American Banker.