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To prevent borrowers from being trapped in this so-called debt trap, the CFPB finalized a new multi-part payday lending regulation in 2017, including requiring payday lenders to verify that borrowers have the means to pay. repay their loan on time by checking information such as income, rent and even student loan payments.
The new set of rules was to apply to a wide range of short-term credit products, other than payday loans, including auto loans.
To give companies time to adapt, the CFPB had originally scheduled the coming into force of the rules in August 2019. However, the Trump administration had asked the agency to delay the implementation and to carry out another examination.
On Wednesday, the CFPB announced that it had completed its review and concluded that the "ability to pay" requirements would limit access to credit. Therefore, the new branch of the agency has proposed to give up these guarantees.
In a statement released on Wednesday, the CFPB said its decision was based, in part, on the fact that the auditing requirements "would reduce access to credit and competition in the states that determined that it was". it was in the interest of their residents to be able to use such means ". products, subject to legal limitations. "
The agency said that there was "insufficient evidence and legal support" for verification requirements, adding that "the cancellation of this requirement would increase consumer access to credit ".
The CFPB has maintained restrictions that prevent payday lenders from repeatedly trying to withdraw payments directly from a person's bank account. Some payday lenders try to get their money back by taking what is owed them directly from borrowers' current accounts, which borrowers grant access as a condition of the loan. But unexpected withdrawals from the lender can generate expensive overdraft fees and damage credit scores.
However, these restrictions will not take effect until at least November 2020.
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