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The Bureau notes direct payday loan lender only, for example choose payday loan, that an authorization obtained pursuant to proposed § 1041 fast payday loan bad credit. However, in cases where lenders and consumers wish to resume payment transfers via preauthorized electronic fund transfers as that term is defined in Regulation E, the Bureau believes that, given the high degree of specificity required by proposed § 1041. The Bureau seeks comment on whether and, if so, what types of additional provisions may be appropriate to clarify whether and how an authorization obtained pursuant to proposed § 1041. In addition, the Bureau seeks comment on whether additional provisions may be appropriate to clarify how the authorization requirements in proposed § 1041. The Bureau believes that 756 requiring lenders to explain these key terms of each transfer to consumers when seeking authorization will help to ensure that consumers can make an informed decision as between granting authorization for additional payment transfers and other convenient repayment options, such as payments by cash or money order, “push” bill payment services, and single immediate payment transfers authorized pursuant to proposed § 1041. In addition, if a lender wishes to obtain permission to initiate ongoing payment transfers from a consumer whose account has already been subject to two consecutive failed attempts, the Bureau believes it is important to require the lender to obtain the consumer’s agreement to the specific terms of each future transfer from the outset, rather than to provide for less specificity upfront and rely instead on the fact that under proposed § 1041. As discussed above, the Bureau believes that, in general, the proposed required notice for all payment transfers would help to reduce harms that may occur from payment transfers by alerting the consumers to the upcoming attempt in sufficient time for them to arrange to make a required payment when they can afford to do so and to make choices that may minimize the attempt’s impact on their accounts when the timing of a payment is not aligned with their finances. However, the Bureau believes that consumers whose accounts have already experienced two failed payment withdrawal attempts in succession would have demonstrated a degree of financial distress that makes it unlikely that a notice of another payment attempt would enable them to avoid further harm. The Bureau seeks comment on all aspects of the proposed exception’s core requirement that the date, amount, and payment channel of each additional payment transfer be authorized by 757 the consumer. In particular, the Bureau seeks comment on whether less prescriptive authorization requirements may provide adequate consumer protections and, if so, what types of less prescriptive requirements may be appropriate. Proposed comment 14(c)(2)(i)-1 explains the general requirement that the terms of each additional payment transfer must be authorized by the consumer. It further clarifies that for the exception to apply to an additional payment transfer, these required terms must be included in the signed authorization that the lender is required to obtain from the consumer under § 1041. Proposed comment 14(c)(2)(i)-2 clarifies that the requirement that the specific date of each additional transfer be expressly authorized is satisfied if the consumer authorizes the month, day, and year of the transfer. Proposed comment 14(c)(2)(i)-3 clarifies that the exception does not apply if the lender initiates an additional payment transfer for an amount larger than the amount authorized by the consumer, unless it satisfies the requirements and conditions in proposed § 1041. The Bureau recognizes that in certain circumstances it may be necessary for the lender to initiate transfers for a smaller amount than specifically authorized, including, for example, when the lender needs to exclude from the transfer the amount of a partial prepayment. In addition, the Bureau believes that this provision 758 may provide useful flexibility in instances where the prohibition on further payment transfers is triggered at a time when the consumer has not yet fully drawn down on a line of credit. In such instances, lenders and consumers may want to structure the new authorization to accommodate payments on future draws by the consumer. With this provision for smaller amounts, the lender could seek authorization for additional payment transfers for the payment amount that would be due if the consumer has drawn the full amount of remaining credit, and then would be permitted under the exception to initiate the transfers for amounts smaller than the specific amount, if necessary. In particular, the Bureau seeks comment on whether this provision inappropriately weakens the consumer protections accorded by the requirement that the specific transfer amount be authorized by the consumer, and, if so, what types of additional protections should be included to ensure greater protections in a manner that addresses the practical considerations noted above. In addition, the Bureau seeks comment on whether the provision sufficiently addresses the specific-amount requirement’s application in instances where the consumer has credit available on a line of credit, or whether specific provisions should be included to clarify the requirement’s application in these instances and, if so, what types of provisions. Specifically, it would provide that when a payment transfer authorized by the consumer pursuant to the exception is returned for nonsufficient funds, the lender is permitted to re-present the transfer on or after the date authorized by the consumer, provided that the returned 759 transfer has not triggered the prohibition on further payment transfers in § 1041. The Bureau believes that this narrow exception would accommodate practical considerations in payment processing and notes that the prohibition in proposed § 1041. Both of these provisions are intended to permit lenders to use a payment authorization obtained pursuant to this subsection to collect a fee that was not anticipated when the authorization was obtained, without having to go through a second authorization process under proposed § 1041. Specifically, the lender could initiate such transfers only if the consumer’s authorization obtained pursuant to proposed § 1041. In addition, the lender would be required to specify in the statement the highest amount for such fees that may be charged, as well as the 760 payment channel to be used. The Bureau believes this required statement may be appropriate to help ensure that the consumer is aware of key information about such transfers—particularly the highest possible amount—when the consumer is deciding whether to grant an authorization. Proposed comment 14(c)(2)(iii)(A)-1 clarifies that the consumer’s authorization for an additional payment transfer solely to collect a late fee or returned item fee need not satisfy the general requirement that the consumer must authorize the specific date and amount of each additional payment transfer. Proposed comment 14(c)(2)(iii)(A)-2 provides, as an example, that the requirement to specify to highest possible amount that may be charged for a fee is satisfied if the required statement specifies the maximum amount permissible under the loan agreement. Proposed comment 14(c)(2)(iii)(A)-3 provides that if a fee may vary due to remaining loan balance or other factors, the lender must assume the factors that result in the highest possible amount in calculating the specified amount. Specifically, the lender could initiate transfers for such combined amounts only if the consumer’s authorization includes a statement, in terms that are clear and readily understandable to the consumer, that the amount of one late fee or one returned item fee may be added to any payment transfer authorized by the consumer. In addition, the lender would be required to specify in the statement the highest amount for such fees that may be charged, as well as the payment channel to be used. Proposed comment 14(c)(2)(iii)(B)-2 cross-references comments 14(c)(2)(iii)(A)-2 and -3 for guidance on how to satisfy the requirement to specify the highest possible amount of a fee. The Bureau seeks comment all aspects of these proposed provisions for additional payment transfers to collect unanticipated late fees and returned item fees. In particular, the Bureau seeks comment on whether the requirements provide adequate protections from consumer harms that may result from such additional payment transfers.

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The second method is to obtain additional reliable information about a consumer’s expenses other than the information required to be obtained under § 1041 payday loan indiana. The example would not mean that a lender is required to obtain this information but would clarify that doing so may be one effective method of estimating a consumer’s basic living expenses payday loan blogs. The method described in the second example may be more convenient for smaller lenders or lenders with no experience working with statistically valid surveys of consumer expenses quick payday loan online, as described in the first example. The Bureau is proposing to include this broadly phrased example to clarify that lenders may use innovative and data-driven methods that reliably estimate consumers’ basic living expenses, even if the methods are not as intuitive as the methods in the first two examples. The Bureau would expect 542 to evaluate the reliability of such methods by taking into account the performance of the lender’s covered longer-term loans, as discussed in proposed comment 9(b)-3. Proposed comment 9(b)-4 would provide a non-exhaustive list of unreasonable methods of determining basic living expenses. The first example is a method that assumes that a consumer needs no or implausibly low amounts of funds to meet basic living expenses during the applicable period and that, accordingly, substantially all of a consumer’s net income that is not required for payments for major financial obligations is available for loan payments. The second example is a method of setting minimum percentages of income or dollar amounts that, when used in ability-to-repay determinations for covered longer-term loans, have yielded high rates of default and reborrowing relative to rates of default and reborrowing of other lenders making covered longer-term loans to similarly situated consumers. The Bureau solicits comment on all aspects of the proposed requirements for estimating basic living expenses, including the methods identified as reasonable or unreasonable, whether additional methods should be specified, or whether the Bureau should provide either a more prescriptive method for estimating basic living expenses or a safe harbor methodology (and, if so, what that methodology should be). The Bureau also solicits comment on whether lenders should be required to ask consumers to identify, on a written questionnaire that lists common types of basic living expenses, how much they typically spend on each type of expense. The Bureau further solicits comment on whether and how lenders should be required to verify the completeness and correctness of the amounts the consumer lists and how a lender should be required to determine how much of the identified or verified expenditures is necessary or, under the alternative approach to defining basic living expenses discussed above, is recurring and not realistically reducible during the term of the prospective loan. Specifically, it would provide that a lender’s determination of a consumer’s ability to repay is reasonable only if, based on projections in accordance with § 1041. If the payments for a covered longer-term loan would consume so much of a consumer’s residual income that the consumer would be unable to meet basic living expenses, then the consumer would likely suffer injury from default or reborrowing or suffer collateral harms from unaffordable payments. For example, some consumers would experience unforeseen decreases in income or increases in expenses that would leave them unable to repay their loans. Thus, the fact that a consumer ended up in default is not, in and of itself, evidence that the lender failed to make a reasonable assessment of the consumer’s ability to repay ex ante. While some consumers may have so little (or no) residual income as to be unable to afford any loan, for other consumers the ability to repay will depend on the amount and timing of the required repayments. Thus, even if a lender concludes that there is not a reasonable basis for believing that a consumer can pay a particular prospective loan, proposed § 1041. To provide greater certainty, facilitate compliance, and reduce burden, the Bureau is proposing comment 9(b)(2)(i)-1. Proposed comment 9(b)(2)(i)-1 would provide that for a covered longer-term loan, a lender complies with the requirement in § 1041. For loans longer than 45 days, the Bureau believes that the particular number and amount of net income payments and payments for major financial obligations that will accrue following consummation and before a payment due date is less instructive for determining sufficiency of the consumer’s residual income, compared to when a loan is less than 45 days. However, because some covered longer-term loans may have payment structures that 546 cause higher payments, or a higher number of payments, to fall due within one month versus other months during the term of the covered longer-term loan, proposed comment 9(b)(2)(i)-1. If the same sum of payments would be due in each month, or if the highest sum of payments applies to more than one month, the lender could make the determination for any such month. The Bureau believes that, in general, a lender’s projection of a consumer’s residual income in compliance with proposed § 1041. Thus, if the consumer’s projected residual income for the month with the highest sum of payments will be sufficient for the consumer to make those payments while also meeting basic living expenses during that month, then that fact is generally sufficient to infer that the same would be true for other months as well. Such an inference would not necessarily be supported, however, if, to reach a conclusion that the consumer will have sufficient residual income in the month with the highest sum of payments, the lender relies on a projected increase in the consumer’s residual income during the term of the loan (e. In that case, even if the projected spike were itself reasonable, there would not necessarily be a reasonable basis to infer that the consumer would also have sufficient residual income in other months (e. The Bureau invites comment on all aspects of its proposed applicable time periods for assessing residual income. Sufficiency of residual income; accounting for volatility in net income and basic living expenses As discussed above, under proposed § 1041. Proposed comment 9(b)(2)(i)-2 would clarify what constitutes “sufficient” residual income for a covered longer-term loan. It clarifies that reasonably accounting for volatility requires considering the length of the covered longer-term loan term because the longer the term of a covered longer-term loan, the greater the possibility that residual income could decrease or basic living expenses could increase at some point during the term of the covered longer-term loan, increasing the risk that the consumer’s residual income will be insufficient at some point during the term of the covered longer-term loan. It clarifies that a cushion is reasonably determined if it is large enough so that a consumer would have sufficient residual income to make payments under the covered longer-term loan despite volatility in net income or basic living expenses experienced by similarly situated consumers during a similar period of time. But occasional reductions in hours (and resulting earnings) or occasional spikes in expenses (such as an occasional spike in a utility bill) 691 are very much to be expected over the course of a longer-term loan. Thus proposed comment 691 See generally Diana Farrell & Fiona Greig, Weathering Volatility: Big Data on the Financial Ups and Downs of U. The Bureau’s outreach found that that at least two lenders that currently undertake ability-to-repay determinations already impliedly or expressly consider volatility of consumer income and expenses in determining what loan payments a consumer can afford. The Bureau invites comment on all aspects of its proposal for accounting for volatility in projected net income and basic living expenses, including whether lenders can reasonably account for volatility in income and basic living expenses and, if so, whether additional specificity should be provided as to how to do so.

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Of the 36 easiest payday loan approval,200 payday complaints apply for a payday loan online, approximately 12 cash advance or payday loan,200 were identified by the consumer as payday complaints and 24,000 were identified as debt collection complaints related 366 to a payday loan. The Bureau has also carefully reviewed the published literature with respect to small-dollar liquidity loans and a number of outside researchers have presented their research at seminars for Bureau staff. As part of this process, the Bureau prepared an outline of the proposals then under consideration and the alternatives considered (referred to above as the Small Business Review Panel Outline), which it posted on its website for review and comment by the general public as well as the small 368 entities participating in the panel process. The Bureau began accepting installment loan complaints in March of 2012, payday loan complaints in November of 2013, and vehicle title loan complaints in July of 2014. The Small Business Review Panel gathered information from representatives of 27 small entities, including small payday lenders, vehicle title lenders, installment lenders, banks, and credit unions. The meeting participants represented storefront and online lenders, in addition to State-licensed lenders and lenders affiliated with Indian tribes. The Small Business Review Panel held a full-day meeting on April 29, 2015, to discuss the proposals under consideration. The 27 small entities also were invited to submit written feedback, and 24 of them provided written comments. The Small Business Review Panel made findings and recommendations regarding the potential compliance costs and other impacts of those entities. These findings and recommendations are set forth in the Small Business Review Panel Report, 369 which will be made part of the administrative record in this rulemaking. The Bureau specifically seeks comment on this Notice of Proposed Rulemaking from small businesses. The Bureau developed several prototype disclosure forms to test with participants in one-on-one interviews. Three categories of forms were developed and tested: (1) origination disclosures that informed consumers about limitations on their ability to receive additional short- term loans; (2) upcoming payment notices that alerted consumers about lenders’ future attempts to withdraw money from consumers’ accounts; and (3) expired authorization notices that alerted consumers that lenders would no longer be able to attempt to withdraw money from the consumers’ accounts. Observations and feedback from the testing were incorporated into the model forms proposed by the Bureau. Through this testing, the Bureau sought to observe how consumers would interact with and understand prototype forms developed by the Bureau. The first round was conducted in September 2015 in New Orleans, Louisiana, and the second round was conducted in October 2015 in Kansas City, Missouri. Of these 28 participants, 20 self- identified as having used a small dollar loan within the past two years. For the origination forms, the questions focused on whether participants understood that their ability to rollover this loan or take out additional loans may be limited. During Round 1, many participants for both form types recognized and valued information about the loan amount and due date; accordingly, that information was moved to the beginning of all the origination forms for Round 2. In contrast, nearly all participants reviewing the Alternative Loan Form understood that it was attempting to convey that each successive loan they took out after the first in this series had to be smaller than the previous loan, and that after taking out three loans they would not be able to take out another for 30 days. Some participants also reviewed a version of this Alternative Loan Form for when consumers are taking out their third loan in a sequence. The majority of participants who viewed this notice understood it, acknowledging that they would have to wait until 30 days after the third loan was paid off to be considered for another similar loan. One adjusted the “30 days” phrasing and the other completely removed the “30 days” language, 125 replacing it with the phrase “shortly after this one. The edits appeared to positively impact comprehension since no participants interpreted either form as providing information on their loan term. There did not seem to be a difference in comprehension between the group with the “30 days” version and the group with the “shortly” version. As in Round 1, participants who reviewed the Alternative Loan Form noticed and understood the schedule detailing maximum borrowable amounts. These participants understood that the purpose of the Alternative Loan Form was to inform them that any subsequent loans must be smaller. Questions for the payment notices focused on participants’ ability to identify and understand information about the upcoming payment. Participants reviewed one of two payment notices: an Upcoming Withdrawal Notice or an Unusual Withdrawal Notice. Both forms provided details about the upcoming payment attempt and a payment breakdown table. The Unusual Withdrawal Notice also indicated that the withdrawal was unusual because the payment was higher than the previous withdrawal amount. To obtain feedback on participants’ likelihood to open notices delivered in an electronic manner, these notices were presented as a sequence to simulate an email message. In Round 1, all participants, based on seeing the subject line in the e-mail inbox, said that they would open the Upcoming Withdrawal e-mail and read it. They reported having no concerns about the e-mail because they would have recognized the company name, and because it included details specific to their account along with the lender contact information.

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The product is available only to those consumers that receive electronic deposits on a recurring basis wisconsin payday loan. Some institutions provide eligible consumers the option to sign up for this product; at other institutions payday loan with checking account, the feature is automatically provided to eligible consumers payday loan on. When an advance is requested, funds are typically deposited into the consumer’s account as soon as the advance is processed, subject to certain limitations on availability for use. Because advances will be repaid automatically when the next qualifying electronic deposits are made to the consumer’s account, there is no fixed repayment date at the time the advance is taken. In the event an outstanding advance is not fully repaid by incoming electronic deposits within 35 days, the consumer’s account will be debited for the amount due, even if this results in the associated deposit account being overdrawn. Like payday loans, the fees associated with deposit advances typically do not vary with the time that the consumer has an outstanding loan balance. The fees are typically disclosed to consumers in terms of dollars per amount advanced. For example, the cost may be described as $2 in fees for every $20 borrowed, the equivalent of $10 per $100. Unlike a payday loan however, the repayment date is not set at the time of the advance and will vary depending on timing and amount of electronic deposits. A consumer is eligible for a deposit advance if she has a deposit account in good standing which has been open for a specified period and has a history of recurring electronic deposits above a minimum size. Credit limits on the deposit advance product are generally set as a percentage of the account’s monthly electronic deposits, up to a certain limit. For example, some depository institutions permit the deposit advance to be the lesser of $500 or 50% of the direct deposits from the preceding statement cycle. The advance limit does not include any associated fees that may be charged for the advance. It typically does not consider the consumer’s overall outstanding debt service burden and living expenses. Like payday loans, traditional credit criteria are not used to determine eligibility. Depository institutions that offer this product generally notify account holders that they are eligible to take advances through online alerts. An eligible consumer can initiate an advance online, via automated voice-assisted phone services, or—at some institutions—in person at a branch. Typically, repayment of an outstanding deposit advance balance is automatically debited from the consumer’s account upon receipt of the next incoming qualifying electronic deposit. Qualifying electronic deposits used to repay advances can include recurring deposits (such as salary or government assistance or benefits) as well as one-time payments (such as a tax refund or expense reimbursement from an employer). Generally, the depository institution captures repayment of advances and fees from the incoming electronic deposit before the consumer can use those funds for other expenses. If that electronic deposit is less than the outstanding deposit advance balance, institutions will typically collect the remaining balance from subsequent electronic deposits. If an advance and the associated fee are not completely repaid through subsequent electronic deposits within 35 days, the depository institution may execute a forced repayment from the consumer’s deposit account for the amount due, even if this causes the account to become overdrawn. As with payday loans, there are variations of the typical deposit advance product. Some allow consumers to repay the loan through a series of installments over a period longer than 35 days. State-chartered depository institutions operate subject to state law, but, as currently structured, the deposit advance product does not meet the definition of payday lending contained in most state laws, and federally chartered institutions are not generally subject to such legislation. Consequently, it appears that depository institutions typically do not consider such laws in setting the features of deposit advance products. Most programs set limits on the number of consecutive months a consumer can use deposit advances. Because deposit advance and overdraft are both services tied to a deposit account, there is potential for various interactions between these products. If account balances are depleted, consumers may use a deposit advance to cover debits before those transactions are posted and thereby avoid incurring overdraft fees. However, if a consumer’s account is already overdrawn when she takes a deposit advance, the advance proceeds are automatically applied to pay off the negative balance resulting from the overdraft and any associated fee first, with the remainder available for her use. In addition, a consumer’s account may become overdrawn from a forced repayment on day 35 if there are insufficient funds in the account to cover the repayment. While our data do not represent all consumers using these products, our findings are an accurate representation of how these products are used by a sizable share of borrowers in the marketplace. The following discussion provides initial data findings on consumer usage of storefront payday loans14 and deposit advances. Information in the data allows us to identify the loans that were made to the same consumer at a given lender, but not to the same consumer across lenders. The sample consists of consumers who have a loan in our dataset in the first month of a 12-month period and then tracks usage across this timeframe. We limit our analysis to this subset of consumers because one focus of our analysis is sustained use, and consumers that we initially observe later in the data can only be followed for a more limited time. The start and end dates of lenders’ 12-month 14 As noted before, while the analysis in this white paper does not include any online payday loan usage, we plan to conduct a similar analysis of that market.

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