CFPB Updates Payday Lending Rule FAQs

The CFPB recently updated its frequently asked questions (FAQs) related to the Payday Lending Rule.  The updated FAQs clarify and provide guidance on the requirements under the Payday Lending Rule.

Some of the key issues addressed in the updated FAQs include, among other things, the following:

• Reminds lenders that the CFPB does not intend to take supervisory or enforcement action under the Payment Provisions for covered loans exceeding $58,300;
• Clarifies that if the cost of credit at consummation is not more than 36% per year, a closed-end loan does not become a covered longer-term loan if the cost of credit later exceeds 36% per year;
• Notes that the exclusion for real estate secured credit applies to refinance transactions if the mortgage or other security interest is perfected during the term of the loan;
• Provides that a single immediate payment transfer at the consumers request that failed is considered a “failed payment transfer” and counts toward the two failed payment transfers allowed by the Payday Lending Rule (and the FAQs also state that only a successful payment transfer that meets the applicable conditions specified in the Payday Lending Rule resets the prohibition on two consecutive failed payment transfers);
• States that if the cost of credit of an open-end loan exceeds 36% at the end of a billing cycle, the lender must comply with the Payday Lending Rule starting at the beginning of the next billing cycle;
• Since the Payday Lending Rule does not define the term “business day,” the FAQs provide that a lender may use any reasonable definition of “business day” (e.g., the definition of “business day” from another CFPB regulation) as long as the lender uses the definition consistently for purposes of complying with the requirements under the Payday Lending Rule; and
• Finally, the FAQs note that the requirement for providing an unusual payment withdrawal notice is triggered if a payment transfer meets any of the following conditions: (i) varies in amount from the regularly scheduled payment amount or an amount that deviates from the scheduled minimum payment due in the periodic statement for open-end credit, (ii) the payment transfer date is on a date other than the date of the regularly scheduled payment, (iii) the payment channel differs from the payment channel of the transfer directly preceding it, or (iv) the transfer is for the purpose of re-initiating a returned transfer.