Magazine article American Banker

CFPB Close to Finishing Payday Loan Rules

Magazine article American Banker

CFPB Close to Finishing Payday Loan Rules

Article excerpt

Byline: Kevin Wack

The Consumer Financial Protection Bureau says it is in the late stages of formulating new regulations for the payday lending business.

The announcement, embargoed for release until midnight Tuesday, came as the agency published new research that it's expected to use in writing the rules.

The research suggests that many consumers who use payday loans do not get stuck in a long-term cycle of debt, but the industry derives most of its revenue from consumers who borrow again and again.

More specifically, the research finds that more than 80% of all payday loans are either rolled over or "renewed" within two weeks -- a point that the industry's critics are expected to cite. But it also finds that about 55% of new payday loans are either never renewed or only renewed once -- a finding that payday industry representatives seem likely to highlight. The report defines renewals as payday loans taken out within 14 days of repayment of a previous loan; rollovers are extensions of unpaid loans.

The report defines renewals as payday loans taken out within 14 days of repayment of a previous loan; rollovers are extensions of unpaid loans.

Broadly speaking, the findings are in line with previous studies of payday lending.

CFPB Director Richard Cordray is expected to say Tuesday that some payday loans should continue to be available but that new restrictions are coming.

The agency's concern "is that all too often those loans lead to a perpetuating sequence," according to a copy of remarks he plans to deliver at an agency hearing on payday lending in Nashville. …

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