It is said that the Chinese have a curse for their enemies: “May you live in interesting times.” Even though this English expression is purported to be a translation of a traditional Chinese curse no actual Chinese source has ever been produced. Still, it's just too darned good not to use!
These past few weeks have indeed been interesting times for traditional installment lenders. There have been several significant events to share with you here:
First, the CFPB released its long awaited Rulemaking Proposal addressing “Payday, Vehicle Title and Certain High-Cost Installment Loans.” The release was not unexpected. The CFPB has been working on the Proposal for three years. Last year in March, the CFPB foreshadowed its intentions in the Outline of Proposals. Not much changed from last year.
The Proposal released June 2, 2016, describes two types of “covered loans.” The first is deemed Covered short-term loans and can be simply described as payday and vehicle title pledge transactions. The second type of covered loan is the Covered longer-term loan. And this part of the Proposal is what brings vehicle secured traditional installment loans within the scope of the Proposal. A loan will also be a Covered longer-term loan if it uses a “leveraged payment mechanism” obtained within 72 hours of inception to receive payments.
The Proposal addresses concepts such as
- presumptions surrounding ability to repay (“ATR”),
- the rebutting of such presumptions,
- alternative loan products not subject to the same ATR scrutiny,
- restrictions imposed on renewals and refinancing,
- record keeping and reporting requirements, and
- other substantive restrictions on lending.
Second, the Governor of Alabama is forming a task force by Executive Order—the Alabama Consumer Credit Task Force—to study and identify areas for specific revision regarding Alabama consumer credit laws. The Task Force will be comprised of approximately 50 people who are representative of all stakeholders in the world of consumer credit in Alabama; and, it is to report its findings and recommendation to the Governor by January 30, 2017. We hope to have a seat on the Task Force. For many years, both lender and consumer activists have been seeking a summit on Alabama's consumer finance laws to bring consistency and transparency into law. Now that opportunity is here.
And, third, this is the season of trade association meetings. These are the opportunities for traditional installment lenders to learn about developments in the law and conduct the business of their trades. Associations from Alabama, Tennessee and Georgia have already held their meetings. Upcoming association meetings are soon to be held for Mississippi, Louisiana, Texas as well as other state association meetings. And, on the national level, the meeting of the National Association of Consumer Credit Administrators which joins in some common sessions with the American Financial Services Association occurred this week in Minneapolis. Director Cordray addressed the state administrators. The National Installment Lenders Association meets in Washington this coming week.
These meetings are even more timely than usual because of the CFPB Rule Proposal release. Much more news will be coming from these meetings.