Richard Corday, director of the CFPB, said: “Extending credit to people in a way that sets them up to fail and ensnares considerable numbers of them in extended debt traps, is simply not responsible lending.”
These new rules cover payday loans, vehicle loans, loans using a car as collateral and various other forms of high-cost lending.
Enders will be responsible for making sure debtors can repay the loan in full on time before extending the loan by checking their income, borrowing history, previous financial obligations and any other indicators that the borrower would most likely default or roll over the loan.
• A 60 day respite between loans
• Lenders must provide affordable repayment options
• Loans cannot exceed $500
• Loans cannot have multiple finance charges
• Loans cannot use a vehicle as collateral
Regulations on interest rates and repayments as a share of income include mandatory capping off to prevent run-a-way fees.