Payday Advance Lenders

Recently, the Bureau of Financial Protection (CFPB) adopted definitive rules for short- and long-term credits with ballon repayments (e.g. payday loans). Creditors will be obliged to reasonably establish whether creditors are in a position to pay back the credit. Moreover, in the case of these credits and longer-term credits with an annual percentage rate of charge of more than 36 per cent which are paid back directly from the consumer's bank accounts, creditors are forbidden from trying to deduct the amount from the consumer's bank accounts after two successive unsuccessful attempted repayments due to inadequate resources.

Which credits are governed by the new ordinance? As a rule, the scheme is applicable to a creditor granting credits through "covered credits". Guaranteed credit' is normally a closed or open transaction that is granted to a customer for his or her own use, whether for his or her own domestic, professional or private needs and meets one of the following requirements: 1. the loan is due within 45 working days of the date on which the grant was made ('covered short-term loans'); 2. the end-user is obliged to pay back the whole amount in a lump sum more than 45 workingdays after the grant date or by at least one repayment which is more than twice the size of any other repayment (or, in the case of a number of advance credits arranged in such a way that making the necessary minimal amount payable does not allow the total amount to be repaid by a given date, the amount of the last repayment could be more than twice the amount of any other repayment)

"Balloon payment loan covered"; or (3) the loan costs exceed 36% and the creditor is entitled to draw funds from the consumer's bank statement. There are certain kinds of loan that are foreclosed, including: i) purchases of cash market collateral (loans granted to finance a consumer's purchases of goods when backed by the goods purchased), (ii) home mortgage purchases, (iii) bank credits, (iv) students' credits, (v) stall handling fees, (vi) advance pay and (vii) certain free advance sums.

Specific alternate mortgages are tax exempted if they meet the following requirements: a) non outstanding credits, b) a maturity of not less than 1 months and not more than 6 monthly, c) the principal amount is not less than $200 and not more than $1,000, d) redeemable in two or more installments, all of which are equally high and spaced equally, and the amount of the Senior Notes will be fully amortized during the life of the Senior Notes, and e) no fee other than the rates and claim rates permitted for Federations under the rules of the National Criminal Union Administration (12 CFR 701.21(c)(7)(iii)) in effect (12 CFR 701.21(c)(7)(iii)) and claim form, other than the rates and claim rates permitted for Federations under the rules of the National Criminal Union Administration (12 CFR 701.21(c)(7)(iii)).

Lenders must also comply with certain other due care and documentary obligations. Exceptions are credits from lenders who do not grant more than 2,500 secured credits per year and do not generate more than 10% of the income from secured credits. What is a reasonable way for a creditor to establish whether a customer will be able to pay back his debts?

In the case of covered short-term loans and covered longer-term balloon payment loans, the creditor must reasonably establish that the creditor has the possibility to reimburse the credit in accordance with the conditions of the credit. It is for the creditor to stipulate that, on the basis of estimations of the consumer's fundamental cost of living and calculations of the degree of indebtedness of the debtor or of the remaining earnings of the debtor, the latter may fulfil all his essential pecuniary commitments, make all payment under the credit and cover the fundamental cost of living during specified horizons.

Creditors must obtain certain certificates from the consumers and take other care to comply with the inspection requirement. Creditors may not grant covered short-term or covered longer-term balloon payment facilities if the customer has a covered short-term or covered longer-term balloon payment facility in arrears during the term in which the customer has a covered short-term or covered longer-term balloon payment facility and the new facility would be the forth in a series of such facilities for 30 consecutive calendar days. 3.

Covered short-term borrowings that meet the following criteria are not covered by this requirement: said nominal amount is not greater than $500 (or less specified amount for supplemental borrowings of a sequence); (x) said borrowing is fully amortized during the life of said borrowing, and said installment plan provides that said borrower will distribute a consumer's installments to the amount due and interest and charges as they arise only by application of a set interest frequency to the amount due and payable of said borrowing during each regular amortization cycle for the duration of said borrowing; (y) no collateral is drawn on the borrowing in respect of the vehicles; and (z) said borrowing is not openly redeemable for the duration of said borrowing.

Lenders must also comply with certain due care and reporting obligations. Creditors may not grant secured short-term loans during the term in which a user has an optional secured short-term loan or secured long-term balloon loan and thereafter for 30 consecutive calendar days. 3. Which methods of payments are forbidden?

In the case of all secured credits, a creditor may not seek to draw the amount from a consumer's bank accounts after two successive unsuccessful payments from that bank accounts due to inadequate resources. Where the creditor receives the consumer's new and special authorisation for further payments from the bank or where the creditor, at the consumer's demand, makes a sole and immediate credit order, this shall not affect this ban, provided that certain conditions laid down in the provisions of the regulation are fulfilled.

Where the creditor is also the accountholder, the movement of money from an account-holding financial institution out of a customer hold at the same financial institution shall not be prevented if it fulfils the following conditions: If the creditor launches a money remittance from the consumer's bank in respect of the Guaranteed Loan for an amount for which there are insufficient resources available in the banker' s banker' s banker' s banker' s banker' s banker' s banker' s account, the creditor shall (A) in accordance with the terms of the credit agreement or of the account contract, not bill the customer for any charges other than a delayed payment under the credit agreement to the consumer; and ( B) in accordance with the conditions of the credit agreements or of the account agreements, the creditor shall not close the customer's banker' s banker' s banker' s banker' s banker' s banker' s banker' s banker' s banker' s banker' s banker' s deposit guarantee shall not debit the consumer' banker' s banker' s banker' banker' account as a reaction to a debit resulting from a money remittance launched in respect of the Guaranteed Loan. 6.

Before disbursing a secured credit from a consumer's bank accounts, the creditor must inform the creditor in the manner and contents provided for in the Ordinance. In the case of each short-term guaranteed credit facility and each long-term balloon payment credit facility, the creditor must transmit certain information to recorded information system at or before the date on which the credit facility is granted, any updating thereof and the date on which the credit facility is no longer overdue.

Any creditor granting secured credit must establish and comply with documented guidelines which are reasonably appropriate to ensuring that it complies with this Ordinance and which are proportionate to the creditor's scale and complexities, as well as the type and volume of credit granted. The creditor must keep proof of adherence to the Ordinance for at least 36 month after the date on which a credit is no longer overdue.

The Office of the Comptroller of the Currency (OCC) "Guidance on Supervision Concerns and Expectations regarding Deposit Advance Products" (Bulletin OCC 2013-40), Im Jahr 2013 veröffentlichte das Office of the Comptroller of the Currency (OCC). Controversial pre-deposit schemes involved the granting of small, short-term credits or credits by a SNB to a client whose savings accounts reflect recurrent items of unpaid funds.

OCC sketched out its expectation of the central bank in relation to these commodities, which involved an evaluation of the customer's repayment capacity, cooling-off period after repayment of a credit before granting another credit and a regular reassessment of the customer's ineligibility.