CFPB Payday Debt Trap Rule

On Feb. 13, 2018, CFPB published finalized change to final rule in federal register.

Becomes effective Apr. 9, 2019, with all changes from Jan. 25, reflected comment.


  • Rule covers loans that require consumers to pay all or most of the debt at once.
  • Include auto title loans, deposit advance products, loans with balloon payment.
  • Many people taking out these loans end up paying expense charges to refinance.

Problems with Loans

  • They are expensive, with annual percentage rate of over 300 percent or higher.
  • They are due in full by the borrower's next paycheck, usually two or four weeks.
  • With single-payment auto loans, borrowers use a car or truck title as collateral.
  • Balloon-payment loans, long-term, often require borrower bank account access.
  • These loans are heavily marketed to the most financially vulnerable consumers.
  • Many borrowers roll over or refinance loans, racking up expensive new charges.
  • Over 4 of 5 payday loans re-borrowed in a month, on or straight after due date.

Rule to Stop Debt Traps

  • Rule requires full-payment test -- can the borrower repay without re-borrowing.
  • Some short-term loans, lenders can skip full-payment test if offer certain option.
  • That 'principal-payoff option' allow borrowers to pay off the debt more gradually.
  • Lenders to get borrower ability-to-pay information from credit reporting system.
  • 'Debt-attempt cutoff' would require full-payment test for balloon-payment loans.
  • Require principle-payoff option for some, unless loan has less risk to consumers.
  • Debit-attempt cutoff also applied to short-term loan and balloon-payment loans.
  • If lender can't access bank account re loan, needed new borrower authorization.