Andrew Duke, CEO of the Online Lenders Alliance and a former policy associate director at the CFPB, said the payday rule holds small dollar lenders to a stricter payment standard than any other industry.
In addition to sending the consumer what the rule calls a “first payment withdrawal notice,” the rule requires other notices intended to protect consumers from harm associated with lenders’ payment practices. Lenders must send an “unusual payment withdrawal notice” if a consumer’s account is tapped after two consecutive failed attempts. For a third attempt, lenders are required to send a “consumer rights notice,” to get consent for further payments. The rule states that repeated attempts at automatic withdrawals constitutes an unfair and abusive practice.
“If allowed to become effective, it could seriously impact access to credit for those consumers most in need, as it will actively discourage lenders from serving consumers who present a higher risk of returned payments,” Duke said. “Furthermore, industry circumstances have changed dramatically in the last eight years, and the Rule is based on obsolete and irrelevant data as old as 2011. We urge the CFPB to conduct a regulatory review of the rule to evaluate its effects and act accordingly based on its findings.”
Read more in American Banker
