Bureau of Consumer Financial Protection: payday loan, vehicle title deed, and some high-cost installment loans


Aug 5, 2020

The Honorable Mike Crapo
The Honorable Sherrod Brown
Ranking Member
Banking, Housing and Urban Affairs Commission
United States Senate

The Honorable Maxine Waters
The Honorable Patrick McHenry
Ranking Member
Financial Services Commission
House of Representatives

Topic: Bureau of Consumer Financial Protection: payday loan, vehicle title deed, and some high-cost installment loans

Pursuant to Section 801 (a) (2) (A) of Title 5, United States Code, this is our report on a major rule promulgated by the Bureau of Consumer Financial Protection (Bureau) entitled “Payday, Vehicle Title, and Certain High-Cost of Installment Loans ”(RIN: 3170-AA80). We received the rule on July 22, 2020. It was published in the Federal Register in good standing on July 22, 2020. 85 Fed. Reg. 44382. It has an effective date of October 20, 2020.

According to the Bureau, the final rule amends its regulations governing breakdown assistance, vehicle title and certain high-cost installment loans. Specifically, the Bureau has stated that it is repealing the provisions of these regulations which provide that it is an unfair and abusive practice for a lender to grant a covered loan with short or long term full repayment, including payday and vehicle title loans, without determining that consumers have the capacity to repay these loans on their terms; prescribing mandatory underwriting requirements to determine repayment capacity; exempt certain loans from mandatory underwriting requirements; and establish related definitions, reports, record keeping and compliance date requirements.

Attached is our assessment of the Bureau’s compliance with the procedural steps required by Section 801 (a) (1) (B) (i) to (iv) of Title 5 in relation to the rule. If you have any questions about this report or would like to contact GAO officials responsible for the assessment work regarding the purpose of the rule, please contact Shari Brewster, Deputy General Counsel, at (202) 512-6398.

Shirley A. Jones
Associate Legal Director


cc: Kathleen L. Kraninger
Consumer Financial Protection Bureau


Consumer Financial Protection Bureau
“On pay day, the vehicle title and certain
High cost installment loans ”
(RIN: 3170-AA80)

(i) Cost-benefit analysis

The Bureau of Consumer Financial Protection (Bureau) has estimated a substantial increase in short-term payday loans and vehicle title loans as well as a corresponding increase in income for lenders. The bureau said its simulations showed a 104 to 108 percent increase in the number of short-term payday loans with a 204 to 213 percent increase in income from those loans compared to the benchmark. The Bureau also said that its simulations showed an increase from 809 to 1,329 percent in the number of vehicle title loans with a corresponding increase in income.

The Bureau estimated that the final rule would improve physical access to credit for consumers, especially in rural areas, through an increase in the number of storefronts. The Bureau said that increasing the number of storefronts would benefit small lenders and lenders in rural areas more than lenders in more densely populated areas. The Bureau also felt that the increased revenue would keep lenders in the market who might otherwise have left the market. Finally, the Bureau stated that the remaining benefits and costs would be much smaller in terms of economic impact and significance. According to the Bureau, most of these impacts manifest themselves in reductions in administrative, compliance or time costs that compliance with the 2017 Final Rule would entail; or as potential costs of revoking aspects of the 2017 Final Rule that could have reduced fraud or increased transparency.

(ii) Agency actions relating to the Regulatory Flexibility Act (RFA), 5 USC §§ 603-605, 607 and 609

The Bureau certified that the final rule would not have a significant economic impact on a significant number of small entities.

(iii) Agency actions regarding sections 202-205 of the Unfunded Mandates Reform Act 1995, 2 USC §§ 1532-1535

As an independent regulator, the Bureau is not subject to the Act.

(iv) Other relevant information or requirements under laws and decrees

Administrative Procedure Act, 5 USC §§ 551 et seq.

On February 14, 2019, the Bureau published a draft rule. 84 Fed. Reg. 4252. The Bureau received approximately 197,000 comments from consumer groups, trade associations, non-depository lenders, banks, credit unions, research and advocacy organizations, members of Congress, drug providers. industrial services, financial technology companies, tribal leaders, religious leaders and

coalitions of religious leaders, as well as state and local government representatives and agencies. The Bureau dealt with the comments in the final rule.

Red Tape Reduction Act (PRA), 44 USC §§ 3501-3520

The Bureau determined that the final rule repeals the information gathering requirements (ICR) for mandatory underwriting requirements in 12 CFR pt. 1041, associated with the Office of Management and Budget (OMB) control number 3170-0065. The Bureau sent a revised ICR request to OMB for the provisions of 12 CFR pt. 1041 not impacted by the final rule. The new ICR will be associated with OMB control number 3170-0071.

Legal authorization of the rule

The Bureau promulgated the Final Rule in accordance with Sections 5511, 5512, 5514, 5531 and 5532 of Title 12, United States Code.

Executive Decree No. 12 866 (Planning and Revision of Regulations)

As an independent regulatory body, the Bureau is not subject to the Order in Council.

Executive Decree No. 13 132 (Federalism)

As an independent regulatory body, the Bureau is not subject to the Order in Council.

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