ATR recently joined a coalition letter led by the Competitive Enterprise Institute in support of the Consumer Financial Protection Bureau’s decision to rescind portions of the small-dollar loan rule, particularly the “ability to repay” requirement. 

The small-dollar loan rule was drafted by the Obama era director Richard Cordray and finalized in 2017, who sought to impose such a high regulatory burden on lenders it would have shuttered over half of the industry. This would have choked off access to millions of Americans from affordable financial products to help, in many cases, cover unexpected costs.

The “ability to repay” standard associated with the rule puts the onerous regulations on the lender to determine if a customer has enough of a funding source or income to pay back their loan. This puts the compliance burden of the lender to go through multiple records of the customer before they can receive the loan. Often times these loans are made to customers when their week is longer than what they have in their wallets and a small $50 – $100 loan will allow them to put food on their table until their next paycheck. Determining a customer’s “ability to repay” would have put many of these short-term lenders out of business and made these small loans unserviceable because the costs of compliance exceeded the loan itself. As the Wall Street Journal pointed out, it was Cordray’s plan all along to dismantle through regulation an industry he found unsavory.

Fortunately, newly confirmed Director Kathy Kraninger announced in February that a new proposal would rescind the ability-to-repay portion of the rule. 

Click here to view the letter