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CFPB Lays Out Guidelines for Protecting Service Members in the Payday Lending Market
Wednesday, September 18, 2013 6:55 AM

The Consumer Financial Protection Bureau (CFPB) yesterday released guidelines to its examiners on how to identify consumer harm and risks related to Military Lending Act (MLA) violations when supervising payday lenders. The CFPB is committed to ensuring that payday lenders comply with the Act, which provides greater protections for military families, including capping annual percentage rates at 36 percent. The new guidelines are included in an updated exam manual that the CFPB released today for the short-term, small-dollar lending industry.

Through its enforcement and supervisory work, the CFPB will be scrutinizing lenders to make sure that they are following the MLA requirements when they make short-term, small-dollar loans to service members and their dependents. Specifically, payday lenders must follow the requirements of the law for all closed-end loans of $2,000 or less and with terms of 91 days or less. These requirements include:

  • Annual percentage rate capped at 36 percent
  • No rolling over of loans
  • No signing away of service member rights
  • No requiring allotments to repay

In January 2012, the CFPB published its first short-term, small-dollar lending procedures manual. The field guide describes the types of information that the agency’s examiners gather to: evaluate payday lenders’ policies and procedures; assess whether lenders are in compliance with federal consumer financial laws; and identify risks to consumers throughout the lending process.

Yesterday’s revised Short-Term, Small-Dollar Lending Procedures can be found at: http://files.consumerfinance.gov/f/201309_cfpb_payday_manual_revisions.pdf

The CFPB is continuing to study the payday lending market to make it work better for all consumers and honest businesses. As part of this effort, the CFPB issued a report in April on payday and deposit advance loans.