The CFPB released a report entitled " Online Payday Loan Payments" ("Report") on April 20, 2016. The Report examined short-term, small-dollar loans (i.e., payday loans) originated by online lenders during an 18-month period in 2011 and 2012. The CFPB examined the costs that may be incurred in connection with online short-term loans due to overdraft or bank fees charged when borrowers have insufficient funds in their bank accounts. The Report was released in advance of the Bureau's anticipated proposed rule on short-term lending.
Summary of the Report's Findings for the 18-month period: Online borrowers were charged a mean total of $92 in overdraft and non-sufficient funds fees for ACH debits where they did not have sufficient funds to cover the previously authorized debts. Seventy-five percent of declined ACH debits were re-presented. As compared to accounts generally, checking accounts with one or more failed transactions from an online lender were more likely to be closed by a depository institution.
The Report may provide further insight into the Bureau's anticipated rulemaking on these issues, including that the Bureau may implement the proposed provision of its " Outline of Proposals Under Consideration and Alternatives Considered" to restrict lenders from initiating more than two successive transactions if there are insufficient funds in a borrower's account.
For more information, please see the Client Alert: CFPB Report on Online Short-Term Lending Finds Borrowers Face Hidden Costs.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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