A new CFPB report, “Market Snapshot: Consumer Usage of Government Payday Loans Extended Payment Plans,outlines the requirements of payday loan extended repayment plan laws in the 16 states that have such laws.
The report also compares extended payment plan usage to payday loan churn and default rates. According to the CFPB, the report “is considered the first study to compare the state’s expansive payment plans and utilization rates.”
The findings put forward by the CFPB in his press release and in Director Chopra’s comments quoted in the press release relate to usage rates for extended payment plans. The CFPB found:
Despite the prevalence of state laws providing for no-fee extended payment plans, data shows that turnover and default rates consistently exceed extended payment plan utilization rates. The Bureau observed that monetary incentives encourage lenders to promote higher cost rollovers at the expense of extended payment plans.
The report strongly suggests that the Bureau believes lenders should do more to educate consumers about the existence and benefits of extended payment plans. In the report, the Office refers to its conclusion in its Summer 2021 Watch Highlights that payday lenders had engaged in deceptive acts or practices by offering chargeable refinance options to distressed borrowers while withholding information about contractually available no-fee repayment plan options.
The Bureau concludes the report by stating that it “will continue to monitor lender practices that discourage consumers from taking extended payment plans and will take appropriate action.”
Perhaps more important than what the report says is what it does not say, which is that the CFPB intends to launch new payday lending regulations that would seek to reinstating the “repayment capacity” provisions in former director Cordray’s original. payday loan rule. These provisions have been canceled by former director Kraninger.
The new report appears to fit Director Chopra’s already well-established pattern using his intimidation pulpit to convince businesses and banks (in this case, payday lenders) to change their behavior without the need to use more formal methods of influencing behavior, such as supervision, enforcement, and/or regulation , which require a lot of resources.