Source: https://www.paulhastings.com/publications-items/details/?id=9cf2e369-2334-6428-811c-ff00004cbded
Timestamp: 2020-05-27 08:08:49
Document Index: 463853447

Matched Legal Cases: ['§ 5481', '§ 5531', '§ 5532', '§ 5481', '§ 5531', '§ 609', '§ 232', '§ 1601', '§ 1681', '§ 1691', '§ 1692', '§ 6801']

BY THOMAS P. BROWN, GERALD S. SACHS & MOLLY E. SWARTZ
The loan has a minimum term of 45 days.
Lenders that hold a deposit account in the consumer’s name would also be prohibited from charging the account to a negative balance or closing the account in the event of delinquency or default.
III. COLLECTION PRACTICES
Paul Hastings attorneys are actively working with clients to identify and address the impact of the proposals on their operations.
[1] The CFPB has issued these proposals, and intends to issue regulations, under sections 1031 and 1032 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, 12 U.S.C. § 5481 et seq. (“Dodd-Frank Act”). Section 1031 of the Dodd-Frank Act authorizes the CFPB to issue rules to identify and prevent unfair, deceptive, or abusive acts or practices in the consumer financial markets. See 12 U.S.C. § 5531(b). Section 1032 of the Dodd-Frank Act authorizes the CFPB to prescribe rules that ensure that the features of a consumer financial product are fully, accurately, and effectively disclosed. See 12 U.S.C. § 5532(a).
[2] The CFPB proposals cover loans obtained “by consumers primarily for personal, family, or household purposes; these proposals do not extend to loans obtained for business purposes. 12 U.S.C. § 5481(5) (defining “consumer financial products or services”); 12 U.S.C. § 5531(b) (authorizing the CFPB to issue rules to identify and prevent unfair, deceptive, or abusive acts or practices in the consumer financial markets).
[3] Notably, these proposals do not cover (1) bona fide non-recourse pawn loans with a contractual duration of 45 days or less where the lender takes possession of the collateral (though vehicle title loans characterizes as “title pawn” transactions would be covered); (2) credit card accounts; (3) real estate secured loans; and (4) student loans. Deposit account overdraft services are also excluded from the proposals.
[4] See Small Business Regulatory Enforcement Fairness Act (SBREFA), 5 U.S.C. § 609(b). In addition to government representatives, the Panel will include representatives from small businesses and not-for-profits that may be subject to the rules that the Bureau may issue.
[5] Although pay periods typically vary from one week to one month, the CFPB has set a 45 day period as an upper bound for “short-term loans” to accommodate loans made shortly before a consumer is paid, which could result in loans that are slight more than a month long.
[6] The CFPB does not intend to create its own reporting system or administer a third-party reporting system.
[7] The CFPB has suggested that it will consider a short-term loan to be part of a loan sequence if, within the past 60 days, the consumer has another outstanding short-term loan or a longer-term loan with balloon payment.
[8] Notably, the CFPB takes the 36 percent APR ceiling from the Military Lending Act’s limitation on the cost of credit extended to military service-members and their dependents. 32 C.F.R. § 232. This calculation would include interest, fees, and the cost of any add-on products such as credit insurance, memberships, and other products sold along with the credit.
[9] A lender could also gain account access through a post-dated check, an automated clearinghouse (ACH) authorization, a remotely created check (RCC) authorization, an authorization to debit a prepaid card account, a right of setoff or to sweep funds from a consumer’s account(s), and other methods of collecting payment from a consumer’s checking, savings, or prepaid account, as well as a payroll deduction.
[10] A balloon payment would be any payment that is more than two times a regular periodic payment.
[11] 15 U.S.C. § 1601 et seq.
[12] 15 U.S.C. § 1681 et seq.
[13] 15 U.S.C. § 1691 et seq.
[14] 15 U.S.C. § 1692 et seq.
[15] 15 U.S.C. § 6801 et seq.
[16] Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products, Office of the Comptroller of the Currency, Docket ID OCC-2013-005 (Nov. 26, 2013), available at http://www.occ.gov/news-issuances/news-releases/2013/nr-ia-2013-182a.pdf.