Compliance Blog

Written by Eliott C. Ponte, Law Clerk

Last week the CFPB released a payday lending report while holding a Payday Field Hearing in Nashville, Tennessee.  Richard Cordray personally announced the report, which built on a previous CFPB white paper, and made the case that short-term loans are not short-term. 

After conducting a yearlong study that involved 12 million payday borrowers, the CFPB found that four out of five payday loans are rolled over or renewed within fourteen days.  The report, which can be found here, also noted that three out of five payday loans are made to borrowers whose fee expense exceeded the amount borrowed, three out of five payday borrowers rolled the payday loan over at least seven times, and cooling-off laws (enacted by state legislatures) have little influence over whether a borrower takes out another payday loan.

While Congress charged the CFPB with ensuring financial markets are fair and transparent for consumers, it is clear that the CFPB is trying to show everyone—especially Congress—that payday lending justifies more regulation and more CFPB power.  

The CFPB’s Payday Field Hearing is a signal that the CFPB is also likely preparing to release new regulations aimed at curbing the practices mentioned above.  It is unlikely that any regulations will exempt smaller payday lenders, as the report seems to blame the entire industry rather than a subset of lenders.

Regular NAFCU Compliance Blog readers will note that we have been monitoring and updating our community on the CFPB’s efforts for some time, and we will continue to provide you with updates as this continues to unfold.