Alternative Finances

CFPB Finalizes Responsible Small Creditor Lending Rules

The CFPB has finalized a set of rules aimed at driving responsible lending from small creditors, following a proposal that was introduced in January.

As part of the new rules pushed forward by the bureau, there are also more provisions to allow for smaller lenders to provide credit, which can help address credit lending issues for certain types of mortgages in rural and underserved areas. Because the rules have been discussed for most of the year, this has allowed those small creditors who wish to be able to offer more credit options to adjust their practices to abide to the new regulations.

“The financial crisis was not caused by community banks and credit unions, and our mortgage rules reflect the fact that small institutions play a vital role in many communities,” said CFPB Director Richard Cordray. “These changes will help consumers in rural or underserved areas access the mortgage credit they need, while still maintaining these important new consumer protections.”

Under the CFPB‘s new rules, the following matters were adopted by the CFPB for mortgage rules:

  • Expand the definition of “small creditor”
  • Include mortgage affiliates in calculation of small-creditor status
  • Expand the definition of “rural” areas
  • Provide grace periods for small creditor and rural or underserved creditor status.
  • Create a one-year qualifying period for rural or underserved creditor status.
  • Provide additional implementation time for small creditors.

For a full explanation of the rules, visit the CFPB’s post about the rules.

These rules, which are in addition to mortgage rules issued by the CFPB in 2013 — many of which that took effect in early 2014 — include rules like the Ability-to-Repay rule, which protects consumers from irresponsible lending practices. The latest round of rules was adopted as proposed and will take effect Jan. 1, 2016.

“Since issuing the mortgage rules, the CFPB has continued to monitor the mortgage market and seek public feedback. The changes finalized today reflect the bureau’s ongoing study of the market and extensive outreach to stakeholders including consumer advocates and industry groups,” the bureau wrote.

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