proposed rule

Consumer Financial Protection Bureau Proposes Rule to End Payday Debt Traps

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On June 2, 2016, the Consumer Financial Protection Board (the “CFPB”) announced a proposed rule that would substantially change the rules governing “payday loans, auto title loans, deposit advance products, and certain high-cost installment and open-end loans.”  The CFPB also indicated it would investigate whether additional products and protections should be covered. Press Release.

The stated purpose of the rulemaking is to protect consumers living paycheck to paycheck from the so-called “debt spiral” of serial borrowing and multiple loan origination and overdraft fees occasioned by chronic liquidity needs.  Given that the proposed rule spans 1,334 densely filled pages, it will take some time to digest the broad requirements and potential impact.  Thus far, however, opinions on whether the proposed rulemaking is likely to achieve its stated goals and the impact it may have on particular businesses or borrowers seem to depend on perspective.  For some, the proposed rule is an example of overreaching by the CFPB that threatens their business and really “miss[es] the mark,” as Richard Hunt, President and CEO of the Consumer Bankers Association, noted last week.  For others, the rulemaking would appear to have a marginal impact, if any.  And some FinTech companies view the proposed rule as an opportunity for market disruption and new entrants.

For a summary of the proposed rules and their potential impact on Current Providers of Short-Term Consumer Loans, Established Banking Institutions and New Market Entrants, and Consumers, please take a look at our analysis, The New CFPB Payday Lending Rules:  An Early Analysis.

The SEC is Seeking Comment on a Joint Agency Proposed Rule Relating to Incentive-based Compensation Arrangements

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On May 6, 2016, the Office of the Comptroller of the Currency, Treasury (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), and the U.S. Securities and Exchange Commission (SEC) issued and sought comment on a joint proposed rule to implement section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) relating to the prohibition on and the disclosure of information of incentive-based compensation arrangements.  The deadline for comments is July 22, 2016.  Notice of Proposed Rulemaking and Request for Comment.

CFTC Proposed Rule on Customer Clearing Restrictions

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On July 19, the CFTC proposed a rule preventing swap dealers, major swap participants, and futures commissions merchants from entering into an arrangement with a customer that would disclose the identity of the customer’s original executing counterparty. The proposed rule would also prevent such CFTC registrants from: (i) limiting the number of a customer’s counterparties; (ii) restricting a customer’s position with an individual counterparty; (iii) impairing a customer’s access to execution of a trade on terms that have a reasonable relationship to the best terms available; and (iv) preventing compliance with specified time frames for acceptance of trades into clearing. Comments must be submitted within 60 days of publication in the Federal Register. CFTC Fact Sheet.