According to a report in The New York Times’ Dealbook, the payday lending regulations the Consumer Financial Protection Bureau is drafting would govern a broader range of short-term loans than some may like, with car title loans and installment loans falling under the guidelines, and would create measures aimed at curbing what the Bureau has been calling the payday lending “cycle of debt.”
The Dealbook article pieces together what the regulations may look like, according to “industry lawyers, consumer groups and government authorities briefed on the discussions who all spoke on the condition of anonymity because the deliberations are private.” Much remains unclear, but Dealbook notes that which loans will be regulated has been “among the most hotly debated parts of the rules.” Reports also indicate the regs will echo findings of the Bureau’s recent studies and enforcement actions, which highlight the number of times borrowers roll over or renew their loans, generating new fees and pushing borrowers into what the Bureau calls a “cycle of debt.” For instance, according to Dealbook, the rules may impose underwriting requirements that become stricter when borrowers apply for repeat loans during a certain period, or limit the number of times a lender could roll over a borrower’s loan in a year.
Morrison & Foerster partner Donald C. Lampe is quoted, noting that millions of Americans rely on short-term loans to get by. “’What payday lending reflects is the fact that the majority of Americans live paycheck to paycheck,’ said Donald C. Lampe, a partner at the law firm Morrison & Foerster, who advises payday lenders. ‘Just punishing payday lenders is not going to prevent Americans from needing short-term products.’”