Summer is the season for many consumer finance trade association annual meetings. The CFPB is the premier topic of interest at most, if not all, of these meetings. Consumer finance companies are focused on past CFPB enforcement actions and how the CFPB’s future rulemaking will affect the consumer finance industry going forward. In addition to anticipating the impact of the March 26th short term, small dollar loan proposal on the industry, the Department of Defense’s military lending safeguards rule is the other summer hot topic.
Enforcement actions over the past year-or-so have been the subject of many of our blog posts (such as here and here). And, some of these enforcement actions have hit close to home for Alabama companies. The RealtySouth action cost that company $500,000. The Regions Bank action cost Regions over $7,500,000 in penalties and much more in consumer remediation. Many of the recent enforcement actions focus on UDAAP and debt collection. But, the CFPB seems anxious to tackle any part of the consumer finance industry where consumers are likely to suffer harm—mortgage loans, auto loans, student loans, and payday loans. It seems that the CFPB is surfacing in every aspect of finance—from origination through collection.
The second major topic that is circulating at this summer’s meetings is the Pentagon’s plans to expand the Military Lending Act regulations beyond payday, title pawn and refund-anticipation loans. The DoD’s proposed changes would require that all finance companies—all traditional installment lenders—check a DoD database to enjoy a safe harbor in making potentially covered loans to potentially covered borrowers where the “all-in” APR equals or exceeds 36%. Requiring this form of safe harbor would create significant costs for installment lenders and would lead to the unintended consequence of closing-off financial services to many deserving consumers, simply because they live on or near a military installation. If the DoD does nothing else to improve upon its most recent draft regulation, it should retain the self-reporting safe harbor concept that exists under its current regulation.
It’s been a busy convention season this summer for the consumer finance industry, and the fall may be even busier.