FORT LAUDERDALE, Fla. – July 14, 2020 On July 7, 2020, the Consumer Financial Protection Bureau issued a final rule concerning payday and small dollar lending to maintain consumer access to credit and competition in the marketplace. The final Payday, Vehicle Title, and Certain High-Cost Installment Loans rule rescinds the mandatory underwriting provisions of the 2017 rule, which required lenders of covered loans to make a reasonable determination of a borrower’s ability to repay.
“The CFPB has signaled its intention to reopen the rule since Mick Mulvaney took over as Acting Director of the Bureau,” said Christopher Leonard, Velocity Solutions CEO. “Consumers will need to be more vigilant than ever in selecting short-term liquidity options, to prevent getting themselves into payday loan traps that will make their financial situation even more precarious in these uncertain times.”
Leonard continued, “Because payday lenders now will be able to continue to make harmful loans that disregard whether a consumer can afford to repay the loan and fees, we urge banks and credit unions to take a closer look at adopting loan platforms that offer efficient, compliant and affordable small-dollar, short-term loans.”
In addition to the rule, the CFPB has tried to expand access to credit by encouraging banks and credit unions to offer responsible installment loans or lines of credit for amounts of up to $2,500. In March 2020, the CFPB issued a joint statement with the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency encouraging banks and credit unions to offer responsible small-dollar loans to consumers and small businesses in response to COVID-19.
Leonard stated, “We pioneered CashPlease®, a new form of short-term, small-dollar lending to provide a vastly less expensive alternative to high-priced loans – all offered by trusted community financial institutions. Our process automates the underwriting, documentation and funding of these loans using alternative data in the underwriting process, which opens credit accessibility to borrowers that might not otherwise qualify. Our solution is fully compliant with the guidelines set by the primary federal financial regulatory agencies, and the loans our clients offered already were exempt under even the prior version of the CFPB’s rule.”
To learn more about Velocity’s digital lending solutions, including CashPlease®, and how they are helping financial institutions provide small-dollar loans to their account holders, please visit: https://myvelocity.com/solutions/digital-lending/.
About Velocity Solutions, LLC
Founded in 1995 and servicing the transaction accounts of over 30 million consumers and business owners, Velocity Solutions is the leading provider of revenue-driving solutions for community banks and credit unions. Our Velocity Intelligent Platform™ powers all of Velocity’s solutions, using machine-led intelligence that delivers powerful analytics and drives revenue, deposits and loans to our client financial institutions.