On June 2, 2016, the CFPB released its long-anticipated Notice of Proposed Rulemaking (“Proposed Rule”) on short-term lending. Although the rulemaking has been characterized as the “payday loan rule,” it is sweeping in terms of the products covered and the limitations it would impose on the short-term consumer lending industry generally. The Proposed Rule is the first federal rulemaking focusing specifically on the short-term lending industry — an industry that traditionally has been governed by state law. Announcing the Proposed Rule primarily pursuant to Title X, Section 1031, of the Consumer Protection Act of 2010 (“Act”), the CFPB cited its authority to “identify and prevent unfair, deceptive, or abusive acts or practices in the consumer financial markets” (“UDAAP”). This is significant, as it marks the first time the CFPB has used its UDAAP authority for rulemaking purposes.
Read our client alert.