The CFPB's Heavy Schedule May Slow New Prepaid Policies

The Consumer Financial Protection Bureau has a busy agenda for the fall that includes possible action on debt collection and prepaid cards, though the agency's overall workload may cause delays.

The CFPB has yet to finalize a proposal establishing new standards for prepaid card providers, and is said to be considering a rulemaking on overdraft coverage. These potential standards have been the subject of much debate in the payments industry, with prepaid advocates arguing new standards would cut into prepaid's ability to encourage financial inclusion and could also curtail virtual currencies.   

Payment and retail industry companies are scrambling to form compliance strategies for the new standards, which could also include guidance for faster payments processing to accommodate m-commerce payments.

In addition to prepaid policy, the financial services industry is also still awaiting a proposal for new restrictions on debt collectors after the CFPB issued an “advance notice of proposed rulemaking” last year, as well as rules dealing with the supervision of large installment and title lenders.

But prepaid and debt collection are not the only CFPB policies in the pipeline, as the agency works on policies for a wide range of financial services, and that could cause prepaid guidance to fall to the back burner.

In the final months of 2015, the CFPB may finalize changes to the lending data companies submit under the Home Mortgage Disclosure Act, formally propose rules on payday lending and issue a final rule giving some small and rural institutions relief from the bureau’s mortgage underwriting regime.

The HMDA rule would finalize a July 2014 proposal expanding the types of mortgage-related data banks submit to gauge lending patterns. The proposal went further than a provision in the Dodd-Frank Act that called for certain changes to the HMDA reporting. A final rule is expected in the fall.

Meanwhile, the CFPB is also expected finally to issue its proposal to curb the risk of payday loan borrowers falling into “debt traps,” possibly within the next couple of months. The agency revealed its framework for payday lenders in March, but the measures had to be reviewed by a statutorily-required Small Business Review Panel before being formally proposed.

Also due for completion is a rule expanding the definition of “small” and “rural” lenders that qualify for favorable treatment under the agency’s “Qualified Mortgage” underwriting standard. The January proposal would benefit potentially thousands more community banks and credit unions by making it easier for them to issue QM loans.

Observers say the sheer volume of items on the CFPB’s agenda means some things on their priority list could stretch into next year.

“I would say that HMDA, payday, debt collection and prepaid are likely the four top priorities, but even that’s a lot and it’s going to stretch their resources,” said Lucy Miller, a partner at Hudson Cook and formerly the CFPB’s deputy enforcement director.