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CFPB excludes most vehicle credit contracts from 'ability to repay' requirements

November 3, 2017
The Consumer Financial Protection Bureau in October finalized its long anticipated rule that, among other features, requires lenders to make "ability to repay" determinations when extending certain payday, vehicle title, and other loans to consumers. 
Although the proposed rule would have covered certain "high cost" vehicle finance contracts, the final rule generally excludes those contracts unless they have a balloon payment feature, which is defined as at least one payment that is more than twice as large as any other payment.
The changes that the CFPB made between the proposed rule and the final rule are significant. Although the CFPB generally lacks authority over franchised dealers who engage in indirect vehicle financing, the CFPB still possesses authority over the dealers’ finance sources. Had the CFPB imposed the ability to repay requirements on those finance sources, they were expected to pass them along to dealers in the form of new contractual duties. 
For this reason, the National Automobile Dealers Association and other trade associations filed written comments with the CFPB in October 2016, urging it to exclude standard vehicle credit contracts from the final rule, which the CFPB ultimately acted upon. This success prevents another expansion of the current regulatory burden on dealers.