The Consumer Financial Protection Bureau on Wednesday proposed an overhaul of its payday lending rule that would roll back tough underwriting requirements that were championed by the agency in the Obama administration.
In a major victory for payday lenders, the agency — led by new Director Kathy Kraninger — plans to rescind the centerpiece of the original rule: rigorous steps forcing lenders to assess borrowers' ability to repay credit. The ability-to-repay provision was seen by supporters as a protection against spiraling consumer debt, but lenders said it threatened their business model.
Kraninger, a Trump appointee who has been on the job less than two months, was widely expected to eliminate restrictions on payday lenders by arguing there was insufficient evidence to support mandatory underwriting of small-dollar loans. The original rule was finalized in 2017 under then-Director Richard Cordray, but the key parts of the rule have not yet gone into effect.
The new proposal would leave intact the rule's payment restrictions, which limit the number of times a lender can try to access a consumer's checking account to two consecutive attempts. The restrictions were designed to protect borrowers’ funds from being garnished by payday lenders or from incurring repeated overdraft fees.
Read more in American Banker.