Joseph (Jay) E. Spruill III

Joseph (Jay) E. Spruill III
Of Counsel

The announcement last week by the Consumer Financial Protection Bureau (CFPB) that it is proposing to rescind the “ability-to-repay” requirement in the payday lending rule proposed during the Obama administration was welcome news to the small loan industry. This ability-to-repay requirement would force lenders to adhere to rigorous procedures in determining whether applicants could afford to repay payday, vehicle title, and certain high-cost installment loans. The CFPB expressed concern that the ability-to-repay rule would reduce access to credit, which is the argument the small loan industry has been making for some time. The CFPB indicated that the evidence underlying the ability-to-repay rule was not “sufficiently reliable and robust” to support the rule in light of the rule’s impact on credit availability.

Interestingly, the CFPB also expressed deference to the judgment of the states as to how small-dollar loans should be regulated, if at all. The CFPB announcement states that the “[CFPB] is concerned that these [ability-to-repay] provisions would reduce access to credit and competition in states that have determined that it is in their residents’ interests to be able to use such products…” In the tug-of-war between those who argue for strong federal regulation of credit practices and those who maintain that credit regulation is best left to the individual states, the CFPB’s announcement this week was a victory for the states’ rights side. One wonders in what other areas the CFPB might show deference to the states in the future.


If you have questions about how CFPB rulings may affect your financial institution, please contact Jay Spruill at jspruill@woodsrogers.com or (804) 343-5031.