19 Nov What Payday Lenders Need to Know About CFPB Compliance
Romney had promised to scale back the scope of the Consumer Financial Protection Bureau (CFPB), but Obama has been re-elected into office and the CFPB is here to stay. The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) in the aftermath of the 2008 mortgage crisis.
According to the CFPB’s website, “Above all, this means ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families—that prices are clear up front, that risks are visible, and that nothing is buried in fine print.”
The CFPB has two sides: one keeps an eye on banks and the other watches over credit institutions like payday loan lenders. Specifically, the CFPB is looking for compliance. Not just compliance on the lenders’ side, but also on their vendors’ parts. Since lenders are responsible and held solely accountable for ensuring their vendors are fully compliant, it’s crucial to understand how the CFPB works and what the Bureau expects.
Lending disclosures are under scrutiny. Lenders must ensure theirs are in compliance, especially in regard to hidden fees and charges or trapping borrowers in a debt cycle. Ensure your vendors, including underwriters and debt collectors, do not have poor security, the possibility for data breaches or engage in fraudulent or illegal business practices.
In October 2012, the CFPB announced that debt collection agencies would soon fall under the Bureau’s oversight. For now, call centers are not under the CFPB’s microscope. However, the Bureau’s mission is to protect consumers from fraudulent, deceptive, and misleading loan terms..
Self-policing in the payday loan industry could go a long way in avoiding such legislation, and the Online Lenders Alliance (OLA) is helping payday loan companies with compliancy issues. The OLA is also lobbying on behalf on payday loan lenders to make sure the CFPB doesn’t make it impossible for them to do business.
Centrinex believes in full disclosure. We think the CFPB should stop irresponsible lenders and help monitor vendor compliance. After all, a few rogue lenders are the ones who have put our industry in the spotlight—and not in a good way—creating a public outcry for more governmental oversight and regulations.
No one, including Centrinex, knows the exact direction the CFPB and payday loan compliance is heading. What we do know is that the CFPB is here to stay for the time being, so we encourage our call center customers to be informed and prepared. Get involved with the OLA and your local legislators. Pay close attention to your lending disclosures and your vendors’ practices too.