Final CFPB rule on “payday loans” generally excludes dealers

Good news for dealers: The final rule from the Consumer Financial Protection Bureau (CFPB) on certain payday, vehicle title and other loans generally excludes franchised dealers. That’s because of some substantial changes from the initial proposal made after written comments that NADA filed on the proposed rule last year.

Among other features, the rule requires lenders to make “ability to repay” determinations when extending those loans. Although the proposed rule would have covered certain high-cost vehicle finance contracts, the final rule generally excludes such contracts unless they have a balloon payment. A balloon payment is defined as at least one payment that is twice as large as any other payment.

Dealers are generally exempt from CFPB rulemaking, but dealers’ finance sources are under the CFPB’s jurisdiction. If the CFPB had required lenders to make “ability to repay” determinations for a wider variety of vehicle finance contracts, lenders were expected to pass those requirements along to dealers in the form of new contractual duties. That’s why NADA and other associations filed comments with the CFPB last year urging it to exclude standard vehicle credit contracts from the final rule – which the agency did.

“This success prevents another expansion of the current regulatory burden on dealers,” said Rhett Ricart, chairman of NADA Regulatory Affairs.

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