Lenders to US consumers have a lot of reading to do these days. In a 1334-page document, the Consumer Financial Protection Bureau (CFPB) recently proposed new ability-to-repay and other requirements applicable to a wide range of short-term and longer-term consumer loans. While the CFPB seeks to address unfair and abusive “debt traps” in payday, title, and other high-cost loans, this proposal is important not just to payday lenders but also to servicers of covered loans and to consumer reporting agencies—so the broader consumer financial services industry should take note. This Legal Update describes the CFPB’s use of its unfair, deceptive, and abusive acts and practices (UDAAP) authority; the types of consumer loans to which the proposal would apply; the proposed ability-to-repay requirement; and other proposed restrictions and requirements for covered loans.
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