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BUREAU OF CONSUMER FINANCIAL PROTECTION
PAPERWORK REDUCTION ACT SUBMISSION
INFORMATION COLLECTION REQUEST
SUPPORTING STATEMENT PART A
PAYDAY, VEHICLE TITLE, AND CERTAIN HIGH-COST INSTALLMENT LOANS
(12 CFR PART 1041)
(OMB CONTROL NUMBER: 3170-XXXX)
OMB TERMS OF CLEARANCE: Not applicable. This is a request for a new Office of
Management and Budget (OMB) control number.
ABSTRACT: This regulation applies to non-depository institutions and loan brokers engaged in
consumer lending, credit intermediation activities, or activities related to credit intermediation,
along with banks and credit unions that make loans that are subject to the rule. The purpose of
this rule is to identify certain unfair and abusive acts or practices in connection with certain
consumer credit transactions, to set forth requirements for preventing such acts or practices, and
to provide certain partial conditional exemptions from aspects of this rule. This rule also
contains requirements to ensure that the features of those consumer credit transactions are fully,
accurately, and effectively disclosed to consumers. This rule also contains processes and criteria
for registration of information systems.
JUSTIFICATION
1. Circumstances Necessitating the Data Collection
The Bureau is issuing a new rule for payday, vehicle title, and certain high-cost installment loans
(12 CFR part 1041) pursuant to Title X of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5481, et seq.).
The purpose of this rule is to identify certain unfair and abusive acts or practices in connection
with certain consumer credit transactions and to set forth requirements for preventing such acts
or practices (See 12 U.S.C. 5531). It prescribes requirements to ensure that the features of those
consumer credit transactions are fully, accurately, and effectively disclosed to consumers and
prescribes processes and criteria for registration of information systems. The rule also provides
certain partial conditional exemptions from aspects of this rule.
For most consumers, credit provides a means of purchasing goods or services and spreading the
cost of repayment over time. Consumers living paycheck to paycheck and with little to no
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savings have used credit as a means of coping with shortfalls, with the credit allowing them to
cover miscellaneous living and short-term expenses until they receive additional income. These
shortfalls can arise from mismatched timing between income and expenses, misaligned cash
flows, income volatility, unexpected expenses or income shocks, or expenses that simply exceed
income. Whatever the cause of the shortfall, consumers in these situations sometimes seek what
may broadly be termed a “liquidity loan.” There are a variety of loans and products that
consumers use for these purposes including credit cards, home equity loans and lines of credit,
deposit account overdraft, pawn loans, payday loans, vehicle title loans, and installment loans.
Credit cards, home equity loans and lines of credit, and deposit account overdraft services are
already subject to federal consumer protection regulations and requirements. The Bureau
considers these markets to be outside the scope of this rulemaking. This rulemaking is focused
on three general categories of liquidity loan products: (1) short-term loans, (2) longer-term
balloon payment loans, and (3) certain higher-cost longer-term installment loans. The largest
category of short-term loans are “payday loans,” which are generally required to be repaid in a
lump-sum single payment on receipt of the borrower’s next income payment, and short-term
vehicle title loans, which are also almost always due in a lump-sum single payment, typically
within 30 days after the loan is made. The second category consists of longer-term loans with a
balloon payment, which the rule generally defines as having a single payment or, where there
there are multiple payments, a payment that is at least twice as large as any other payment. The
third category consists of higher-cost longer-term installment loans. It includes both what are
often referred to as “payday installment loans”—that is, loans that are repaid over time with each
payment timed to be paid with the borrower’s income payment and electronically deducted from
an account into which the income payment is deposited—and vehicle title installment loans.
While loans covered by this rulemaking are most often made by non-bank lenders, some
depository institution products also fit these descriptions. Some of these loans are available at
storefront locations and branches, others are available on the Internet, and some loans are
available through multiple delivery channels. The rulemaking covers both closed-end loans and
open-end lines of credit.
The rule’s underwriting provisions, consisting of §§ 1041.4 to 1041.6 apply to the first and
second categories, covered short-term and longer-term balloon-payment loans. Section 1041.10
likewise applies to those two categories. The rule’s payment provisions, consisting or §§ 1041.7
to 1041.9 apply to all three categories. Section 1041.12 and 1041.13 likewise apply to all three
categories.
2. Use of the Information
The Bureau’s rulemaking includes information collection requirements related to (1)
development, implementation, and continued use of notices for covered short-term loans made
under § 1041.6, upcoming payment notices (including unusual payment notices), and consumer
rights notices; (2) obtaining a consumer report from a registered information system; (3)
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furnishing information about consumers’ borrowing behavior to each registered information
system; (4) retrieval of borrowers’ national credit report information; (5) collection of
consumers’ income and major financial obligations during the underwriting process; (6)
obtaining a new and specific authorization to withdraw payment from a borrower’s deposit
account after two consecutive failed payment transfer attempts; (7) application to be a registered
information system; (8) biennial assessment of the information security programs for registered
information systems; (9) retention of loan agreement and documentation obtained when making
a covered short-term loan or covered longer-term balloon payment loan, and, along with the loan
type and term, and payment history and loan performance.
Loan disclosures would be provided, as applicable, by lenders or vendors working on their
behalf. Under the rule, disclosures may be provided through a variety of channels, including
electronically. First, under § 1041.6, the rule would require lenders to provide an origination
disclosure for certain covered short-term loans; this disclosure would communicate to consumers
important information about the costs, benefits, and risks of these loans. Section 1041.6 would
also require a disclosure after the third loan in a sequence of loans covered by that section.
Second, under § 1041.9, the rule would require lenders making covered loans to provide
disclosures before initial payment withdrawal attempts, and before any unusual withdrawal
attempts. The payment notice would alert consumers to the upcoming withdrawal, including
potential changes to the typical payment amount, thereby mitigating the risk of certain adverse
consequences associated with payment transfer attempts when the consumer’s account lacks
sufficient funds. Third, also under § 1041.9, the rule would also require lenders to provide a
consumer rights notice in certain circumstances when two payment transfer attempts have failed.
Lenders making covered loans would be required to provide this notice, as applicable. The
consumer rights notice would ensure that the costs, benefits, and risks of the loan and associated
payments are effectively disclosed to consumers.
Under §§ 1041.5 and 1041.6, lenders would also obtain information about consumer use of
covered loans by obtaining a consumer report from a registered information system. For covered
loans subject to the ability-to-repay requirements in the rule, obtaining and reviewing a consumer
report from a registered information system would be instrumental to determining the
consumer’s borrowing history. Together with the national consumer report and other
underwriting documents described below, information about the consumer’s use of covered
short-term and longer-term balloon-payment loans would facilitate reliable ability-to-repay
determinations. For loans made under §§ 1041.5 and 1041.6, obtaining and reviewing a
consumer report from a registered information system would ensure that the consumer is eligible
for such a loan.
Under § 1041.10 lenders would also provide information about consumer use of covered shortterm and longer-term balloon-payment loans by furnishing information to each registered
information system. For these covered loans, furnishing information about the consumer’s
borrowing behavior to each registered information system would ensure that the consumer
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reports lenders obtain from these systems are sufficiently timely and accurate to achieve the
consumer protections that are the goal of this part.
Under § 1041.5 lenders would obtain a national credit report, other underwriting documents,
such as documents verifying income and a borrowing report from an RIS, and potentially stated
housing or income expenses for covered short-term and longer-term balloon-payment loans
subject to the ability-to-repay requirements. Under the rule, these documents can be collected
through a variety of channels, including electronically, such as from a specialty consumer
reporting agency, the consumer, and potentially a nationwide consumer reporting agency. The
collection, and review, of the national consumer report and other underwriting documents would
enable the lender to verify information about the amount of a consumer’s income and major
financial obligations, thereby facilitating reliable ability-to-repay determinations.
Under § 1041.8, lenders would obtain a new and specific authorization from a consumer in order
to withdraw payment from a consumer’s deposit account after two consecutive payment transfer
attempts have failed. The new and specific authorization would ensure that consumers maintain
control of their deposit account and enable the lender to withdraw payments on a covered loan
from the consumer’s deposit account after two consecutive failed payment transfer attempts.
Under § 1041.11, applications to be a registered information system would be submitted to the
Bureau by entities seeking to be registered. The process for becoming a registered information
system prior to the effective date of § 1041.11 would require an entity to submit an application
for preliminary approval with information and documentation sufficient to determine that the
entity would be reasonably likely to satisfy the conditions to become a registered information
system. If an entity obtains preliminary approval by the Bureau, it would need to provide certain
written assessments contemplated by the rule and submit an application to be a registered
information system; the rule would also permit the Bureau to require an entity to submit to the
Bureau additional information and documentation to facilitate determination of whether the
entity satisfies the eligibility criteria to become a registered information system. On or after the
effective date of § 1041.11, an entity may become provisionally registered by submitting an
application that contains information and documentation sufficient to determine that the entity
satisfies the conditions to become a registered information system, including written assessments
contemplated by the rule. An information system that is provisionally registered under this
approach will automatically become a registered information system upon the expiration of a
180-day period. Once an entity is a registered information system, the rule would require the
entity to submit biennial assessments of its information security program. The rule’s
requirement to submit to the Bureau the applications and written assessments described above is
essential to the Bureau’s ability to ensure that registered information systems would enable
lender compliance with the requirements of the rule so as to achieve the consumer protections
therein and to confirm that the information systems maintain compliance programs reasonably
designed to ensure compliance with applicable laws and prevent the risk of data breach.
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Under § 1041.12 lenders would be required to retain several types of documentation related to
evidence of compliance with the requirements of the rule. The rule requires lenders to use
electronic records to satisfy certain recordkeeping requirements. The recordkeeping
requirements would facilitate the Bureau’s supervision and enforcement of the requirements of
the rule.
3. Use of Information Technology
The rule is conscious of the use of information technology and other automated means as a
solution to potentially reduce or limit the information collection burdens associated with the rule.
For example, the required disclosures could be made electronically through various means, and
required reports could also be obtained and retained electronically. Additionally, the
recordkeeping provision in § 1041.12 would not limit the use of available technology to maintain
required records. The rule would allow covered persons to retain records in any legible form,
and in the same manner, format, or place as such records are kept in the ordinary course of
business (See § 1041.12(b)). The rule does, however, require lenders to retain certain data in an
electronic, tabular format. Thus, this rule is consistent with the aims of the Government
Paperwork Elimination Act, 44 U.S.C. 3504.
4. Efforts to Identify Duplication
The recordkeeping, reporting, and disclosure provisions in the rule would not duplicate any other
Federal information collection requirement. The information collection requirements are unique
to this rule.
5. Efforts to Minimize Burdens on Small Entities
The disclosure, reporting, and recordkeeping requirements would be imposed on all lenders
making covered short-term and longer-term balloon-payment loans, and some of the disclosure
and recordkeeping requirements would apply to covered high-cost installment loans as well. The
Bureau estimates that approximately 90% of respondents are small entities. Most lenders today
utilize some measure of computerization in their business, and the rule would permit lenders to
rely on computer support, among other alternatives, to meet their recordkeeping, reporting, and
disclosure requirements. This flexibility presumably would yield reduced disclosure, reporting,
and recordkeeping costs (see section 3 of this supporting statement, above). The rule also
provides model forms that could be used to comply with certain of its requirements, and lenders
that use the model forms would be deemed to be in compliance with the disclosure requirement
with respect to such model forms.
The Bureau held a SBREFA panel on the rulemaking for payday, vehicle title, and similar loans
on April 29, 2015. Representatives for small entities were given questions to consider about the
impact of the proposals under consideration. The representatives provided feedback about how
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their businesses function, how the proposals under consideration would affect their business, and
provided existing studies and research that cover the markets affected by the proposals under
consideration.
6. Consequences of Less Frequent Collection and Obstacles to Burden Reduction
If the rule, including the information collection requirements contained therein, is not adopted,
some of the most vulnerable consumers who rely on the loan products that are covered by this
rule would not have the protections contained in the rule that are intended to prevent certain
unfair and abusive acts or practices in connection with certain consumer credit transactions.
Without the recordkeeping and reporting requirements, the Bureau would not have a tangible
mechanism to ensure that consumers are receiving the protections contained in the rule.
7. Circumstances Requiring Special Information Collection
There are no special circumstances. The collection of information requirements are
consistent with the applicable guidelines contained in 5 CFR § 1320.5(d)(2).
8. Consultation Outside the Agency
In accordance with 5 CFR 1320.11, on July 22, 2016 the Bureau published a notice of proposed
rulemaking in the Federal Register, 81 FR 47863, inviting the public to comment on the
information collection requirements contained in this rule. The Bureau received over 1.4 million
comments 1 which are summarized along with the Bureau’s response to those comments in the
preamble to the Notice of Final Rulemaking.
The Bureau has been studying and conducting market monitoring activities of the markets
for liquidity loans for more than five years, gaining insights from a variety of sources.
During this time the Bureau has also conducted supervisory examinations of a number of
payday lenders and enforcement investigations of a number of different types of liquidity
lenders. Through all of these activities, the Bureau has gained insights into the business
models and practices of such lenders and also has obtained extensive loan-level data that the
Bureau has studied to better understand risks to consumers. The Bureau has published four
reports based upon these data along with a supplemental report included with the issuance of
the Notice of Proposed Rulemaking. The Bureau has also carefully reviewed the published
literature with respect to small dollar loans and a number of outside researchers have
presented their research at seminars for Bureau staff. In addition, over the course of the past
five years the Bureau has engaged in extensive outreach with a variety of stakeholders in
1
The large number of comments is in part due to coordinated campaigns led by lenders encouraging borrowers to
submit pre-written forms.
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both formal and informal settings, including several Bureau field hearings across the
country specifically focused on the subject of small dollar lending, meetings with the
Bureau’s standing advisory groups, meetings with State and Federal regulators, meetings
with consumer advocates, religious groups, and industry trade associations, consultations
with Indian tribes, and through a Small Business Review Panel process.
The Bureau received numerous comments addressing the estimates of burden hours and
costs subject to the rule. The Bureau provided several updates to burden hour and cost
estimates with new viable data provided since the Notice of Proposed Rulemaking. Some
burden hour and cost assumptions were left unchanged because no additional viable data
was provided. More detailed reponses to comments can be found in the Final Regulatory
Flexibility Analysis and the Section 1022(b)(2) Analysis.
As part of the process under the Small Business Regulatory Enforcement and Fairness Act
(SBREFA process), the Bureau released in March 2015 a summary of the rulemaking
proposals under consideration in the Small Business Review Panel Outline. At the same
time that the Bureau published the Small Business Review Panel Outline, the Bureau held a
field hearing in Richmond, Virginia, to begin the process of gathering feedback on the
proposals under consideration from a broad range of stakeholders. Immediately after the
Richmond field hearing, the Bureau held separate roundtable discussions with consumer
advocates and with industry members and trade associations to hear feedback on the
proposals under consideration. On other occasions, the Bureau met with members of
industry trade associations representing storefront payday lenders to discuss their feedback
on the Small Business Review Panel Outline.
At the Bureau’s Consumer Advisory Board (CAB) meeting in June 2015 in Omaha,
Nebraska, a number of meetings and field events were held about payday, vehicle title, and
similar loans. The CAB advises and consults with the Bureau in the exercise of its functions
under the Federal consumer financial laws, and provides information on emerging practices
in the consumer financial products and services industry, including regional trends,
concerns, and other relevant information. The CAB events in June 2015 included a visit to a
payday loan store, and a day-long public session that focused on the Bureau’s proposals
under consideration as well as trends in payday and vehicle title lending. The CAB has
convened six other discussions on consumer lending. In June 2016, just a few days after the
Bureau publicly released the proposed rule, the CAB held another public meeting on this
topic in Little Rock, Arkansas. Among other things, Bureau officials gave a public briefing
on the proposed rule to the CAB members, and the Bureau heard testimony from the general
public on the subject. Two of the Bureau’s other advisory bodies also discussed the
proposals outlined in the Small Business Review Panel Outline: the Community Bank
Advisory Council held two discussions, and the Credit Union Advisory Council conducted
one discussion.
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Bureau leaders, including the Director of the agency and staff, have spoken about the
Bureau’s work on payday, vehicle title, and installment lender at events and conferences
throughout the country. These meetings have provided additional opportunities to gather
insight and recommendations from both industry and consumer groups about how to
formulate a rule. In addition to meetings with lenders and trade associations, and to
information learned through supervisory and enforcement activities, Bureau staff has made
fact-finding visits to at least 12 non-depository payday and vehicle title lenders, including
those that offer single payment and installment loans.
See Part III of the Preamble to the rule for a full description of the Bureau’s efforts to
consult with parties outside of the Bureau on this rule.
9. Payments or Gifts to Respondents
Not applicable. No payment, gifts, or other incentives are provided to respondents.
10. Assurances of Confidentiality
The rule provides no assurance of confidentiality to entities that are covered by this rule.
The information that may be collected for law enforcement purposes would be covered by the
following Systems of Records Notices (SORNs): CFPB.004 Enforcement Database, 76 FR
45757, that can be found at https://www.federalregister.gov/articles/2011/08/01/201119424/privacy-act-of-1974-as-amended; and the CFPB.018 CFPB Litigation Files SORN, 77 FR
27446, that can be found at https://www.federalregister.gov/articles/2012/05/10/201211233/privacy-act-of-1974-as-amended.
To the extent that information covered by a recordkeeping requirement is collected by the
Bureau for law enforcement purposes, the confidentiality provisions of the Bureau’s rules on
Disclosure of Records and Information, 12 CFR part 1070, would apply.
11. Justification for Sensitive Questions
To the extent that the rule requires lenders to provide borrowers’ personal financial information
to a reporting agency, this reporting is necessary to carry out the purposes of the rule and carry
out the rule’s required ability-to-repay requirements.
12. Estimated Burden of Information Collection
In calculating the potential burdens of information collections that are required by the rule, the
Bureau generally relies on estimates of the market as it existed at the time of the Notice of
Proposed Rulemaking. The actual burden hours are likely to be substantially smaller in light of
the impact the rule will have on the number of covered persons and number of covered loans
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originated. Using the Bureau’s burden estimation methodology, the total estimated burden for
the approximately 9,900 institutions subject to the rule, including Bureau respondents, would be
approximately 8,199,819 labor burden hours annually.
The aggregate estimates of total burdens are based on estimated costs that are averages across
respondents. The Bureau expects that the amount of time required to implement each of the
changes for a given institution may vary based on the size, complexity, and practices of the
respondent. The Bureau assumes that the one-time costs to comply with requirements, such as
software upgrades, includes costs to hire outside firms to assist with the implementation of the
requirements. While the Bureau believes these costs to be marginal, these one-time cost
estimates could potentially underestimate the true cost for some lenders.
Exhibit 1: Burden Hour Summary 2
Information
Collection
Requirement
Disclosures
[§§ 1041.6(e)
& 1041.9]
Obtaining
consumer
report from a
registered
information
system
[§§ 1041.5 &
1041.6]
Information
furnishing
requirements
[§ 1041.10]
National
Credit Report
[§ 1041.5]
Underwriting
Documents
[§ 1041.5]
Prohibited
payment
transfer
attempts –
requirements
and
conditions for
obtaining
consumer’s
No. of
Respondents
Type of IC
Frequency
Annual
Responses
9,045
3rd Party
Disclosure
On
occasion
235,903,844
Average
Response
Time
0.013
Annual
Burden
Hours
3,054,872
Hourly
Rate 3
Annual Burden
Hour Costs
$21.19
$64,723,890
5,105
Recordkeeping
On
occasion
118,918,138
0.019
2,293,466
$16.10
$36,935,129
9,887
Reporting
On
occasion
120,085,002
0.007
816,587
$16.77
$13,693,061
5,105
Recordkeeping
On
occasion
19,261,129
0.028
529,739
$18.92
$10,020,393
5,105
Recordkeeping
On
occasion
19,261,129
0.071
1,370,423
$18.00
$24,668,997
9,045
Recordkeeping
On
occasion
14,478,524
0.009
134,715
$25.54
$3,440,461
2
Hourly rate and average response Time estimates are subject to rounding error because they are derived from the
annual responses, average response time, and annual burden hour costs estimates.
3
Bureau of Labor Statistics, May 2016, Occupational Employment and Wage Estimates,
http://www.bls.gov/oes/current/oessrci.htm. The hourly rate and annual burden hour costs incorporate BLS wages
which are weighted averages composed of the average wages for a specific sector and corresponding occupation.
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Information
No. of
Type of IC
Frequency
Annual
Average
Annual
Collection
Respondents
Responses
Response
Burden
Requirement
Time
Hours
authorization
[§ 1041.8]
Compliance
9,887 Recordkeeping
On
120,085,002
0
0
Program and
occasion
Record
Retention
[§ 1041.12]
Registered
1
Reporting
1x
1
13.333
13
Information
system –
initial
assessment
[§ 1041.11]
Registered
1
Reporting
Biennial
1
4.000
4
Information
system –
biennial
assessment
[§ 1041.11]
Totals:
9,900*
647,992,770
8,199,819
*Note: Unduplicated count. Total number of entities that would be required to comply with this regulation.
Hourly
Rate 3
Annual Burden
Hour Costs
$0
$0
$58.14
$775
$62.64
$251
$153,482,956
A. Disclosures
The rule requires different notices in certain situations. One notice is required to be given before
consummation to borrowers taking out a covered short-term loan made under § 1041.6. A notice
is required upon making the third loan in a sequence of loans made under § 1041.6. Other
notices would relate to lenders’ attempts to obtain payments on covered loans by initiating
withdrawals from borrowers’ deposit accounts or prepaid card accounts. One notice is required
in advance of the lender’s first payment attempt, and another must be provided before attempting
an unusual payment withdrawal. The other disclosure is required if a lender were no longer
permitted to attempt to collect payment directly from a borrower’s account because prior
consecutive payment attempts had failed due to non-sufficient funds.
Many of the costs to comply with these requirements would be common across the disclosures,
and therefore those costs are discussed together in this section.
The Bureau believes that all lenders originating covered loans would incur some burden due to
the disclosure requirements with the exception of lenders making vehicle title loans. The
origination disclosure would apply only to covered short-term loans originated under § 1041.6,
which would not include loans that take security interest in a consumer’s vehicle. The remaining
disclosures are required when lenders obtain and use the ability to initiate withdrawals from
consumers’ accounts for payment on a covered loan. Vehicle title lenders do not typically obtain
and use the ability to initiate withdrawals from consumers’ accounts. Thus, when calculating the
estimated burden of the notices on respondents, specifically for non-depositories, vehicle title
lenders are excluded.
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Under the rule, it would be the lender’s responsibility to deliver each of the disclosures, although
an affiliate or service provider may create and deliver the notices on the lender’s behalf.
i. One-Time Burden
The Bureau believes that all lenders that would be affected by the new disclosure requirements
have some disclosure system already in place to comply with existing Federal and State law
disclosure requirements, such as those imposed under Regulation Z, 12 CFR part 1026 and
Regulation E, 12 CFR part 1005. Lenders enter data directly into the disclosure system, or the
system automatically collects data from the lenders’ loan origination system. For this analysis,
the Bureau assumes that most lenders would use the services of a vendor to print and/or deliver
disclosures. 4 For disclosures provided via mail, email, or text message, the disclosure system
forwards to a vendor, in electronic form, the information necessary to prepare the disclosures,
and the vendor then prepares and delivers the disclosures. For disclosures provided in person,
the disclosure system produces a disclosure, which the lender then provides to the borrower.
Respondents would incur a one-time burden to modify their existing disclosure systems to
comply with new disclosure requirements. Respondents would need to modify their disclosure
systems to compile necessary loan information to send to the vendors that would produce and
deliver the disclosures relating to payments, as well as origination disclosures for loans
originated online, and to produce the origination disclosures delivered in person. The Bureau
believes that large depositories and non-depositories rely on in-house proprietary disclosure
systems, and estimates the one-time programming cost for large institutions to modify these
systems to be 1,000 labor burden hours per entity. The Bureau believes small depositories and
non-depositories would incur only operations and materials costs to modify their disclosure
systems, which are discussed in Section 13 below.
To determine the annual burden, the Bureau distributes the one-time burden over three years.
For depositories, the annualized one-time burden to modify existing systems would be 274,410
burden hours, the equivalent of $13,602,504 in burden hour costs. For non-depositories, the total
annualized one-time burden to modify existing systems would be 38,333 burden hours, the
equivalent of $1,853,222 in burden hour costs.
Covered persons would also incur one-time costs associated with training employees on the
disclosure requirements. The Bureau uses the number of employees per location 5 and the total
number of locations 6 to calculate the total number of labor burden hours depositories and non4
Although some lenders may currently create and deliver disclosures in-house, given the increase in the volume of
disclosures the rule would require, the Bureau believes most lenders would typically rely on vendors to print and
deliver the disclosures.
5
Bureau of Labor Statistics Occupational Employment Statistics using the specific NAICS code associated with
each industry covered by the rule.
6
Calculated from State licensee lists and industry estimates.
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depositories would spend training employees on the new requirements for disclosures. Given the
structure of depositories, the Bureau believes depositories would train half of their employees on
average at each location rather than all employees. The Bureau estimates that it would require
one labor burden hour to train each employee on the disclosure requirements. To determine the
annual burden, the Bureau distributes the one-time burden over three years. For the 4,782
depositories, the Bureau estimates the annualized one-time burden from training employees on
the disclosure requirements would be 87,170 labor burden hours, the equivalent of $3,376,504 in
burden hour costs. For the 4,263 non-depositories 7 the Bureau estimates the one-time burden
from training employees on the disclosure requirements would be 41,828 labor burden hours, the
equivalent of $1,096,749 in burden hour costs.
ii. Ongoing Burden
The Bureau estimates that covered persons would also need to have periodic staff training to
comply with the disclosure requirements. The Bureau estimates that the 4,782 depositories and
the 4,263 non-depositories would experience half an hour of additional training per employee per
year as a result of the disclosure requirements. For depositories, the total ongoing annual burden
on respondents for periodic staff training would be 130,755 labor burden hours, the equivalent of
$5,064,755 in burden hour costs. For non-depositories, the total ongoing annual burden on
respondents for periodic staff training would be 62,743 labor burden hours, the equivalent of
$1,645,124 in burden hour costs.
a. Origination Disclosures
There are three disclosures the Bureau anticipates will be provided by the lender at origination.
These include: for covered short-term loans made under § 1041.6, the origination disclosures; for
loans that represent a third loan in a sequence of covered short-term loans made under § 1041.6,
an additional disclosure outlining the constraints on reborrowing (e.g that the borrower is not
able to take an additional covered short-term loan or longer-term balloon-payment loan for at
least 30 days after the closure of the third loan); and for any loans covered under § 1041.5 and
certain other high-cost longer-term loans, an initial payment disclosure describing the timing and
amount of the initial payment to be collected. The Bureau believes each of these would be
typically delivered at the time of origination in the store for loans originated in a storefront and
delivered through the website or an e-mail for loans originated online. The Bureau believes that
100 percent of large lenders and 80 percent of small lenders that provide disclosures in person
use disclosure systems that automatically collect data from the lenders’ loan origination system.
For the remaining 20 percent, lenders would spend two minutes to enter payment information
directly into the disclosure system. Additionally, in stores, the Bureau estimates that lenders
would spend two minutes to deliver the origination disclosure to the borrower in the store. For
7
For reasons discussed, vehicle title lenders would not incur burdens as a result of the disclosure requirements in the
rule and thus, are excluded from this calculation.
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non-depositories, the total annual burden to provide the origination disclosures would be
2,419,634 labor burden hours, the equivalent of $38,085,032 in burden hour costs.
b. Unusual Payment Disclosure
For all covered loan payments, other than for loans made under one of the conditional
exemptions, where lenders obtain and use the ability to initiate withdrawals from consumers’
accounts for loan payments, the rule would require payment disclosures, which vary depending
on the nature of the payment request. If a respondent is attempting to withdraw an unusual
payment from the borrower’s account, such as a payment that is being withdrawn on a day
different from what was originally scheduled or a payment for a higher amount than was
originally provided in the payment schedule, the payment notice will provide the borrower with
that information as well. Using information from industry and data provided to the Bureau by
lenders, the Bureau has estimated the total number of loans that would be covered by the rule.
Additionally, the Bureau has used data from several lenders to calculate the average number of
payments for each of the products that would be covered by the rule. The Bureau believes that 4
percent of the payment requests would be subject to the unusual payment notice. 8
The Bureau estimates there would be no labor burden associated with these payments
disclosures.
c. Consumer Rights Disclosure
For the consumer rights disclosure, respondents would be required to provide a consumer rights
notice to borrowers after a respondent has made two consecutive unsuccessful attempts to
withdraw payment from a borrower’s deposit account. This disclosure requirement would apply
to all covered loans that meet the other criteria for the disclosure. Based on industry data and
Bureau analysis, the Bureau uses estimates of the number of loan payments that are made and the
share of loan payments that fail twice in a row to determine the number of payments that would
be subject to the consumer rights notice. The Bureau estimates that about 4 percent of payment
requests would cause the need for the consumer rights notice.
The Bureau estimates there would be no labor burden associated with the consumer rights
disclosures.
B. Obtaining and Furnishing of Information about Covered Loans
8
Additionally, the Bureau believes the elimination of allowing lenders to automatically tack on late fees to regularly
scheduled payments from the post-cap re-authorization requirements should have no effect on the lenders’ unusual
payment notice burdens. The unusual late payment notice requirement for fee-only debits applies regardless of
whether the lender is debiting under an original authorization or a new.
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In the rule, respondents would be required to obtain a consumer report from an information
system registered for over 180 days pursuant to § 1041.11 to retrieve information about a loan
applicant’s borrowing history. This requirement would apply to all covered short-term loans and
covered balloon-payment loans originated. Respondents would also be required to furnish
certain information about consumers’ borrowing behavior to each registered information system
for all covered short-term loans and covered-balloon payment loans originated. While
depositories would be required to furnish information about consumers’ borrowing behavior, the
Bureau believes it is a customary and usual business practice for depositories to furnish
information to consumer reporting agencies. 9
The total labor burden is reported separately in Exhibit 1 for the requirement to obtain a
consumer report from a registered information system and the requirement to furnish information
to each registered information system. 10 However, since the two information collections share
related costs, they are discussed together in this section.
i. One-Time Burden
The Bureau estimates a share of the non-depository institutions would upgrade their systems to
retrieve consumer reports regarding loan applicants’ borrowing histories from a registered
information system automatically and to furnish information concerning covered short-term
loans and covered longer-term loans automatically. The Bureau believes that large nondepositories would rely on in-house proprietary systems, and estimates the one-time
programming cost for large institutions to upgrade their systems to be 500 labor burden hours per
entity. The one-time programming burden would encompass several of the requirements of the
rule, and thus only one-third of the 500 labor burden hours are attributed to the obtaining and
furnishing of information about covered short-term loans and covered balloon-payment loans. 11
The Bureau believes that all large non-depositories would upgrade their systems to interact with
the registered information systems automatically. The Bureau believes small non-depositories
would only experience operations and materials costs to upgrade their systems to interact with
the registered information systems automatically, which are discussed in section 13 below. To
determine the annual burden, the Bureau distributes the one-time burden over three years. For
non-depositories, the annualized one-time burden to upgrade their systems to interact
automatically with a registered information system would be 8,056 burden hours, the equivalent
of $389,437 in burden hour costs. Half of the 8,056 burden hours is attributed to the requirement
to obtain a consumer report from a registered information system, and the remaining half is
attributed to the requirement to furnish information to each registered information system.
9
See 5 CFR § 1320.3(b)(2).
In this analysis, the Bureau provides estimates for only 1 registered information system.
11
If more than one registered information system exists, the programming costs may increase. The Bureau
estimates this increase to be approximately 250 additional hours of programming per registered information system.
10
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As a result of the obtaining and furnishing requirements, non-depository respondents would
incur one-time costs associated with training employees. The Bureau uses the same
methodology introduced in the “Disclosures” section to determine the total number of employees
that would need to be trained at non-depositories as a result of the obtaining and furnishing
requirements. The Bureau estimates that it would take one hour to train an employee on the
rule’s requirements regarding obtaining and furnishing of information about covered short-term
loans and covered-balloon-payment loans. For the 5,105 non-depositories, the Bureau estimates
the annualized one-time burden to train employees on the requirements pertaining to consumers’
borrowing history would be 59,295 labor burden hours, the equivalent of $1,501,847 in burden
hour costs. Half of the 59,295 burden hours is attributed to learning about the requirement to
obtain a consumer report from a registered information system, and the remaining half is
attributed to learning about the requirement to furnish specified information to each registered
information collection.
ii. Ongoing Costs
Lenders would be required to obtain a consumer report containing borrowing history information
for every covered short-term and covered longer-term balloon-payment loan that is originated.
Lenders likely would not obtain these consumer reports containing borrowing history
information for all loan applicants, but rather only the subset that has passed other basic
screening during the lending process. The estimate of the ongoing costs to obtain consumer
reports containing borrowing history information provided here is calculated based on the
number of loans currently originated, which are, by definition, loans that have passed the other
basic screens that lenders currently employ. This may still be an upper bound, as lenders might
not carry out all of the steps required by the rule if, for example, some applications were to be
rejected based on one of the steps required and therefore the lender would not complete
subsequent steps. The Bureau has relied on industry estimates and data provided by lenders to
estimate the total number of loans originated.
The Bureau estimates 100 percent of large lenders and 80 percent of small lenders, excluding
lenders only making loans under one of the conditional exemptions , would implement systems
that would automatically request the consumer report containing borrowing history information
from an information system currently registered pursuant to § 1041.11 during the application
process. For the remaining 20 percent of small respondents, the Bureau estimates that it would
take nine minutes to obtain a consumer report containing borrowing history information. For
non-depositories, the annual burden to obtain consumer reports would be 2,215,320 labor burden
hours, the equivalent of $34,863,102 in burden hour costs.
Respondents also would be required to furnish information about covered short-term loans and
covered longer-term balloon-payment loans to each registered information system. Respondents
would be required to furnish information about a loan no later than the date on which the loan is
consummated or as close in time as feasible to the date the loan is consummated. While such a
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loan is outstanding, lenders must furnish information about any update to information previously
furnished pursuant to the rule within a reasonable period of time following the event prompting
the update. And when such a loan ceases to be an outstanding loan, lenders must furnish the date
as of which the loan ceased to be outstanding. Again, the Bureau estimates 100 percent of large
respondents and 80 percent of small respondents, excluding lenders only making loans under one
of the conditional exemptions, would implement systems that would automatically furnish this
information to each registered information system. For the remaining 20 percent of small
respondents, the Bureau estimates that it would take three minutes or less per originated loan to
meet all furnishing requirements. 12 For non-depositories, the total annual burden to furnish loan
information to each registered information system would be 738,440 labor burden hours, the
equivalent of $11,621,034 in burden hour costs.
In addition to the one-time costs for staff training, the Bureau estimates that covered persons
would also need to have periodic staff training on the rule’s requirements to verify and furnish
information about covered short-term loans and covered balloon-payment loans. The Bureau
estimates that the 5,105 non-depositories would experience half an hour of additional training per
employee per year as a result of the requirements regarding borrowing history. For nondepositories, the total ongoing annual burden on respondents for periodic staff training would be
88,943 labor burden hours, the equivalent of $2,252,770 in burden hour costs. Half of the 88,943
burden hours is attributed to learning about the requirement to obtain a consumer report from a
registered information system, and the remaining half is attributed to learning about the
requirement to furnish specified information to each registered information collection.
C. National Credit Report
The rule requires respondents to retrieve information from a borrower’s national credit report in
order to identify any major financial obligations. This requirement applies to all covered shortterm loans and covered balloon-payment loans, except loans made under one of the conditional
exemptions. The Bureau believes depositories would originate loans using only the conditional
exemptions. Therefore, depositories would not incur any additional burden to collect borrowers’
national credit report information.
For any covered loan originated under § 1041.5, lenders would be required to retrieve national
credit report information. However, some specialty consumer reporting agencies offer consumer
reports that include the required national credit report information, and the Bureau believes that
lenders would satisfy these requirements by obtaining such a report.
12
While the Bureau expects there will be no ongoing costs to furnish information to RISs other than routine
maintenance of reporting systems, it is possible that there could be modest per loan furnishing costs (e.g.
comparable to the costs of pulling from an RIS) depending on the business model(s) adopted by RISs. In this case,
multiple RISs could increase the reporting costs slightly.”
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i. One-Time Burden
The Bureau estimates a share of respondents would upgrade their systems to retrieve loan
applicants’ national credit report information from a specialty consumer reporting agency
automatically during the application process. The Bureau believes that large non-depositories
would rely on in-house proprietary systems, and estimates the one-time programming cost for
large institutions to upgrade their systems to be 500 labor burden hours per entity. As mentioned
in the “Obtaining and Furnishing of Information about Covered Loans” section, this
programming burden encompasses several information collections, and thus only one-third of the
500 programming hours is attributed to the national credit report requirement. The Bureau
believes that all large non-depositories would upgrade their systems to interact with the specialty
credit reporting agency automatically. The Bureau believes small non-depositories would only
experience operations and materials costs to upgrade their systems to interact with the specialty
consumer reporting agencies automatically, which is discussed in section 13 below. To
determine the annual burden, the Bureau distributes the one-time burden over three years. For
non-depositories, the annualized one-time burden to upgrade their systems to interact
automatically would be 8,056 burden hours, the equivalent of $389,437 in burden hour costs.
As a result of the national credit report requirements, respondents would incur one-time costs
associated with training employees. As described when calculating the training costs for the
disclosure requirements and the requirements concerning borrowing history, the Bureau uses the
number of employees at each location that would need to be trained and the total number of
locations to calculate the total number of labor burden hours non-depositories would spend
training employees on the rule’s national credit report requirements. The Bureau estimates that it
would take one hour to train an employee on the national credit report requirements. For the
5,105 non-depositories, the Bureau estimates the annualized one-time cost of training employees
on the national credit report requirements would be 59,295 labor burden hours, the equivalent of
$1,501,847.
ii. Ongoing Costs
The ongoing cost to obtain information from a national credit report is calculated based on the
current number of loans originated. As described in the “Obtaining and Furnishing of
Information about Covered Loans” section, the Bureau has relied on industry estimates and data
provided by lenders on loan to estimate total originations. Lenders would be required to obtain
the information from the consumer report for every loan that is originated, excluding the loans
originated using one of the conditional exemptions for covered loans. The Bureau uses the total
number of loans originated to calculate the costs respondents would incur to retrieve the
applicant’s consumer report information.
The Bureau estimates 100 percent of large respondents and 80 percent of small respondents
would implement systems that would automatically request this information from the specialty
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consumer reporting agency during the application process. For the remaining 20 percent of
small respondents, the Bureau estimates that it would take nine minutes to obtain a consumer
report. However, under §1041.5, a lender would not need to pull a new national credit report if,
during the preceding 90 days, the lender or its affiliate has obtained a national credit report for
the consumer and the consumer has not taken out a sequence of three loans under § 1041.5 and
triggered the 30-day cooling-off period. Due to this provision, the Bureau believes its burden
hours and costs estimates may be an upper bound. For non-depositories, to obtain applicants’
national credit report information would impose an annual burden of 373,445 labor burden
hours, the equivalent of $5,876,339 in burden hour costs.
In addition to one-time costs for the training of staff, the Bureau estimates that covered persons
would also need to have periodic staff training on the rule’s consumer report requirements. The
Bureau estimates that the 5,105 non-depositories would experience half an hour of additional
training per employee per year on the consumer report requirements. For non-depositories, the
total ongoing annual burden for periodic staff training would be 88,943 labor burden hours, the
equivalent of $2,252,770 in burden hour costs.
D. Underwriting Documents
Section 1041.5 of the rule includes requirements to collect certain documents for respondents
that originate covered short-term loans and covered balloon-payment loans other than those
made under one of the conditional exemptions.
i. One-Time Burden
The Bureau estimates a share of respondents would upgrade their systems to retrieve the various
underwriting documents from specialty consumer reporting agencies automatically. The Bureau
believes that large non-depositories would rely on in-house proprietary systems, and estimates
the one-time programming cost for large institutions to upgrade their systems to be 500 labor
burden hours per entity. As mentioned in the “Obtaining and Furnishing of Information about
Covered Loans” and the “National Credit Report” sections, this programming burden
encompasses several information collections, and thus only one-third of the 500 programming
hours is attributed to the underwriting documents information collection. The Bureau believes
that all large depositories, to the extent that such institutions are making loans under § 1041.5
would upgrade their systems to interact with the specialty consumer reporting agency
automatically. The Bureau believes small depositories and non-depositories would only
experience operations and materials costs to upgrade their systems to interact with the specialty
consumer reporting agencies automatically, which are discussed in Section 13 below. To
determine the annual burden, the Bureau distributes the one-time burden over three years. For
non-depositories, the annualized one-time burden to upgrade their systems to interact
automatically would be 8,056 burden hours, the equivalent of $389,437 in burden hour costs.
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Online lenders would experience an additional one-time cost to update their online loan
application. The new underwriting requirements would require online lenders to obtain new
information from borrowers during the application process. The Bureau estimates this would
require eight hours of programming time per entity. For the 125 online lenders, the Bureau
estimates the one-time burden to update their websites would be 1,000 labor burden hours.
Annualized, the one-time cost for online lenders to update their websites would be 333 hours or
the equivalent of $16,115 in burden hour costs.
Respondents would incur one-time costs associated with training employees as a result of the
underwriting requirements. As described when calculating the one-time training costs in the
previous three sections, the Bureau uses the number of employees per location that would need
to be trained and the total number of locations to calculate the total number of labor burden hours
depositories and non-depositories would spend training employees on the underwriting
requirements. The Bureau estimates that it would take two labor burden hours to train each
employee on the underwriting requirements. For the 5,105 non-depositories, the Bureau
estimates the annualized one-time cost of training employees on the underwriting requirements
would be 118,590 labor burden hours, the equivalent of $3,003,694 in burden hour costs.
ii. Ongoing costs
The rule also would require covered persons to obtain documents that detail several of the
applicant’s financial metrics in order to underwrite and originate a loan. These requirements
apply to all covered short-term loans and covered longer-term balloon payment loans except
those originated using one of the conditional exemptions. The Bureau estimates this requirement
would affect 33 million loans per year. The Bureau believes that the burden hour estimates may
be an upper bound.
First, respondents would be required to obtain documentation detailing the applicant’s income if
verification evidence, such as past pay stubs or bank statements, is reasonably available.
Otherwise, respondents may reasonably rely on stated income. The Bureau believes that it is the
customary and usual business practice of most lenders making covered short-term and covered
balloon-payment loans to obtain this documentation. Many vehicle title lenders, however, do
not currently obtain this documentation. Based on industry estimates and data provided to the
Bureau, the Bureau estimates there are nearly 3 million vehicle title loans per year. The Bureau
estimates that it would take four minutes for a respondent to identify an applicant’s income. The
total annual burden to identify income for non-depositories would be 173,060 labor burden
hours, the equivalent of $2,722,234 in burden hour costs for non-depositories. However, the
Bureau believes this estimate may be an upper bound because of the provision that allows a
reliance on reasonably stated income when income verification evidence is not reasonably
available.
Respondents would also be required to obtain documentation of housing expenses or rely on
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reasonable stated applicants’ rental expenses.
For borrowers with monthly mortgage payments, respondents would be able to determine the
amount from the national credit report. The lender may determine the housing expenses through
the national credit report or through reasonable stated rental expenses. The Bureau estimates
100 percent of large respondents and 80 percent of small respondents would implement systems
that would assist in determining an ability to repay. The Bureau estimates it would require one
minute per application for the lender to document the housing expenses. For the remaining 20
percent of small respondents, the Bureau estimates that it would take six minutes per application
for the lender to document the housing expenses. For non-depositories, the total annual burden to
document housing expenses from applicants would be 255,363 labor burden hours, the
equivalent of $4,017,960 in burden hour costs. However, the Bureau believes this estimate may
be an upper bound for a number of reasons, such as the provision that allows a reliance on
reasonably stated rental expenses and already having documents readily available.
Alternatively, lenders may determine an amount under a reliable method of estimating a
consumer’s housing expense based on the housing expenses of consumers with households in the
locality of the consumer. The Bureau believes respondents would be able to obtain this
information from a specialty consumer reporting agency at the same time that the respondent
requests the consumer report information. While the Bureau believes few entities would follow
up with this procedure due to reasons such as the allowance of relying on reasonable stated rental
expenses, the Bureau believes the following estimates in this paragraph are conservative. The
Bureau estimates that 80 percent of the storefront lenders’ applications and all of the online
lenders’ applications would obtain the additional housing information from a specialty consumer
reporting agency. The Bureau estimates 100 percent of large respondents and 80 percent of
small respondents would implement systems that would automatically request this information
from a specialty consumer reporting agency during the application process. For the remaining
20 percent of small respondents, the Bureau estimates there would be minimal additional burden
to request the applicant’s housing expenses from a specialty consumer reporting agency while
requesting the consumer report information; this burden is covered in the “National Credit
Report” section.
In addition, the rule requires respondents making loans subject to the ability-to-repay
requirements to ask applicants to provide information regarding the applicant’s major financial
obligations. The Bureau estimates 100 percent of large respondents and 80 percent of small
respondents would implement systems that would assist in determining an ability to repay. The
Bureau estimates this would take three minutes on average per application. For the remaining 20
percent of small respondents, the Bureau estimates this would take nine minutes on average per
application. For non-depositories, the total annual burden to assess major financial obligations
would be 637,469 labor burden hours, the equivalent of $10,030,132 in burden hour costs.
However, the Bureau believes this estimate may be an upper bound for reasons such as already
having documents readily available (e.g. a).
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Respondents would also experience ongoing costs to train employees. The Bureau estimates that
the 5,105 non-depositories would experience one hour of additional training per employee per
year as a result of the underwriting requirements. For non-depositories, the total annual ongoing
cost to respondents for periodic staff training would be 177,885 labor burden hours, the
equivalent of $4,505,540 in burden hour costs for non-depositories.
E. Obtaining a New and Specific Authorization
After a respondent has made two consecutive unsuccessful attempts to withdraw payment for a
covered loan from a borrower’s account, the rule would prohibit lenders from making additional
payment attempts to withdraw funds from the borrower’s account unless a new and specific
authorization is obtained from the borrower to do so. The Bureau believes that most respondents
would send the request to obtain a new and specific authorization while sending the consumer
rights disclosure as described in the “Disclosures” section.
As discussed in the “Disclosures” section, vehicle title lenders do not typically obtain and use the
ability to initiate payment withdrawals from consumers’ accounts, and thus, such lenders are
excluded when calculating the burden for obtaining a new and specific authorization to withdraw
payment from a borrower’s deposit account.
i. One-Time Burden
The Bureau estimates that 25 percent of small storefront lenders and all the remaining
respondents would upgrade their websites to allow for borrowers to provide authorization online.
The Bureau estimates that it would take the respondents 40 burden hours to perform these
upgrades. For depositories, the annualized one-time burden to program their systems to obtain
authorization through their websites would be 24,173 burden hours, the equivalent of $1,198,259
in burden hour costs. For non-depositories, the annualized one-time to program their systems to
obtain authorization through their websites would be 15,360 labor burden hours, the equivalent
of $742,594 in burden hour costs.
ii. Ongoing Costs
When borrowers do not provide a new and specific authorization on the lender’s website, there
would be labor burden to the lenders to obtain the consumer’s authorization. When consumers
reauthorize by clicking a link, the marginal cost would be zero. When consumers reauthorize by
responding to a lender’s new and specific authorization request with another email, phone call, or
store visit, the cost to lenders to process the reauthorization would be two minutes. The Bureau
estimates that storefront lenders would engage with consumers for 80 percent of the
authorization requests. For lenders operating online, the Bureau estimates that lenders would
engage with consumers for 50 percent of the authorization requests. For depositories, the total
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annual burden to obtain a new and specific authorization would be 1,105 labor burden hours, the
equivalent of $18,978 in burden hour costs. For non-depositories, total annual burden to obtain
authorization through their websites would be 94,077 labor burden hours, the equivalent of
$1,480,631 in burden hour costs.
F. Compliance Program and Record Retention
The rule would impose new compliance program and record retention requirements on
respondents. The rule would require covered persons to maintain written policies and procedures
reasonably designed to ensure compliance with the rule. Covered persons would also need to
retain loan agreements and documentation obtained for covered short-term loans and coverd
longer-term loans. Covered persons would also have to retain electronically calculations used to
determine the applicant’s ability to repay and determine whether the applicant qualifies for an
exception for such covered loans. Respondents would be required to keep electronic records
regarding loan type and terms. Respondents would also be required to keep electronic records of
payment history and loan performance for all covered loans. Respondents would be required to
keep these records for three years after the loan ceases to be an outstanding loan. The Bureau
believes it is customary and usual for lenders to maintain loan agreements and information
collected from the consumer during the application process. Given lenders’ existing business
practices and the requirements to electronically furnish information to a registered information
system, the Bureau believes that maintaining any additional information required by the rule
would not impose additional costs on respondents that have not already been calculated.
G. Registered Information System
Section § 1041.11 identifies criteria that an entity must meet to become a registered information
system. When applying to be a registered information system, the entity must provide the
Bureau with information and documentation sufficient for the Bureau to determine that the
criteria are met. Additionally, once registered, the information system would be required to
provide a biennial independent assessment of its information security program.
In Exhibit 1, the labor burden is reported separately for the application process to be a registered
information system and the biennial assessment. However, since the two information collections
are related, they are discussed together in this section.
i. One-Time Burden
The Bureau estimates that it would take approximately 40 hours to collect and document the
required information to apply to be a registered information system. As this designation does not
currently exist and thus, no entities are currently considered to be a registered information
system, the Bureau estimates the burden for one representative respondent. The total annualized
cost to apply to become a registered information system would be 13 burden hours, the
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equivalent of $775 in burden hour costs.
ii. Ongoing costs
The Bureau estimates the ongoing burden to the registered information system to prepare and
report the biennial assessment of their information security program to be 8 hours. Annualized,
the burden for the representative one registered information system would be 4 labor burden
hours, the equivalent of $251 in burden hour costs.
13. Estimated Total Annual Cost Burden to Respondents or Recordkeepers
The Bureau estimates the material cost burden to respondents as a result of each of the
information collections.
Using the Bureau’s cost burden estimation methodology, the total estimated cost burden annually
for the approximately 9,900 institutions subject to the rule, including Bureau respondents, would
be approximately $100,844,367. For the Bureau institutions subject to this rule, the total
estimated cost burden annually would be approximately $49,656,527. The Bureau assumes that
the one-time costs to comply with requirements, such as software upgrades, includes costs to hire
outside firms to assist with the implementation of the requirements. While the Bureau believes
these costs to be marginal, these one-time cost estimates could potentially underestimate the true
cost for some lenders.
Exhibit 2: Cost Burden Summary
Description of Costs (O&M)
Information Collection Requirement
Disclosures
[§§ 1041.6(e) & 1041.9]
Obtaining consumer report from a registered
information system
[§§ 1041.5 & 1041.6]
Information furnishing requirements
[§ 1041.10]
National Credit Report
[§ 1041.5]
Underwriting Documents
[§ 1041.5]
Prohibited payment transfer attempts –
requirements and conditions for obtaining
consumer’s authorization
[§ 1041.8]
Compliance Program and Record Retention
[§ 1041.12]
Registered Information system – initial
13
Per Unit Costs
Quantity
Total Cost
$0.05
235,903,844
$11,238,913
$0.50
118,918,138
$59,736,415
$0.00
120,085,002
$0
$1.47
19,261,129
$28,235,122
$0.07
19,261,129
$1,407,404
$0.02
14,478,524
$226,513
$0.00
120,085,002
$0
$0.00
1
$0
13
Per unit cost estimates are subject to rounding error because they are derived from the quantity and total cost
estimates.
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assessment
[§ 1041.11]
Registered Information system – biennial
assessment
[§ 1041.11]
Totals:
$0.00
1
$0
647,992,770
$100,844,367
A. Disclosures
i. One-Time Burden
The Bureau believes all small depositories and non-depositories rely on licensed commercial
disclosure system software. Depending on the nature of the software licensing agreement, the
Bureau estimates that the cost to upgrade this software would be $10,000 for lenders licensing
the software at the entity-level and $100 per seat for lenders licensing the software using a seatlicense contract. For respondents using seat licenses software, the Bureau estimates that each
location for small depositories and non-depositories has on average three seats licensed. Given
the price differential between the entity-level licenses and the seat-license contracts, the Bureau
believes that only small lenders with a significant number of stores would rely on the entity-level
licenses. The Bureau estimates that 5 percent of the small respondents would rely on entity-level
licenses and the remaining 95 percent would rely on seat-license contracts.
In addition to the modifications to the disclosure systems, the Bureau estimates that small nondepository storefront lenders would pay $200 to a vendor for a standard electronic origination
disclosure form template.
To determine the annual cost burden, the Bureau distributes the one-time cost over three years.
For depositories, the annualized one-time burden to modify existing systems would be
$1,950,963 in material costs. For non-depositories, the annualized one-time burden to modify
existing systems would be $1,863,842 in material costs for non-depositories.
ii. Ongoing Costs
For disclosures delivered through the mail, the Bureau estimates that vendors would charge two
different rates, one for high volume mailings and another for low volume mailings. The Bureau
applies the high volume cost to large respondents and the low volume cost to small respondents.
For the high volume mailings, the Bureau believes vendors would charge $0.40 per disclosure;
however, the Bureau uses $0.53 in the estimates. For the low volume mailings, the Bureau
estimates vendors would charge $1.00 per disclosure. For disclosures delivered through e-mail,
the Bureau estimates vendors would charge $0.01 to create and deliver each e-mail such that it
complies with the requirements of the rule. For disclosures delivered through text message, the
Bureau believes most vendors would charge $0.01 to create and deliver each text message such
that it complies with the requirements of the rule; however, the Bureau uses $0.08 in the
estimates.
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Using these standard estimates, the Bureau estimates the ongoing costs to create and deliver each
of three disclosures. As previously mentioned, not all disclosures would apply to all loans or
loan payments.
a. Origination Disclosure
The origination disclosure would only be required for loans made under § 1041.6 Using total
origination volume for payday loans, the Bureau estimates that there are approximately 67
million covered short-term covered loans that are originated in a storefront location and 40
million covered short-term covered loans originated online. For non-depositories, the Bureau
estimates that 93.0 percent of covered short-term loans per year would be originated using the
principal step-down approach. The remaining 7.0 percent of covered loans would be made under
the ability-to-repay requirements.
The Bureau believes three types of dsclosures would be delivered at the time of origination, in
the store for loans originated in a storefront and through the website or an e-mail for loans
originated online. These include: for covered short-term loans made under § 1041.6, the
origination disclosures; for loans that represent a third loan in a sequence of covered short-term
loans made under § 1041.6, an additional disclosure outlining the constraints on reborrowing (e.g
that the borrower is not able to take an additional covered short-term loan or longer-term
balloon-payment loan for at least 30 days after the closure of the third loan); and for any loans
covered under § 1041.5 and certain other high-cost longer-term loans, an initial payment
disclosure describing the timing and amount of the initial payment to be collected. In stores, the
Bureau estimates the cost of printing these disclosures to deliver the disclosure to the borrower in
the store would be $0.10 per loan. For similar loans originated online, the Bureau estimates the
lender would pay the vendor $0.01 to produce and deliver each disclosure. For non-depositories,
the total annual burden to provide the origination disclosures would be $6,639,262 in materials
cost.
b. Unusual Payment Disclosure
The Bureau believes that 4 percent of payment requests would be subject to the unusual payment
notice.
For both covered short-term and longer-term loans originated in a storefront, the Bureau
estimates that 10 percent of the payment notices would be delivered by mail, 80 percent of the
payment notices will be delivered by e-mail, and 10 percent of the payment notices would be
delivered by text message. For covered loans originated online, the Bureau estimates that 80
percent of the payment notices would be delivered by e-mail, and 20 percent of the payment
notices would be delivered by text message.
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Similar to the section above, for each unusual payment notice, the Bureau estimates lenders
would pay the vendor $0.53 or $1.00, depending on volume, for disclosures delivered by mail,
$0.01 for disclosures delivered by e-mail, and $0.08 for disclosures delivered by text message.
The total annual burden that non-depositories would incur for the payment notices would be
$670,589 in materials cost.
c. Consumer Rights Disclosure
The Bureau estimates that about 4 percent of payment requests would cause the need for the
consumer rights notice. For loans originated at a storefront location, the Bureau estimates 10
percent of notices would be delivered by mail, 80 percent of notices would be delivered by email, and 10 percent of notices would be delivered by text message. For loans originated online,
the Bureau estimates that 20 percent of notices would be delivered by e-mail, and 80 percent of
notices would be delivered by text message. The total annual burden imposed on depositories to
provide the consumer rights disclosure would be $17,620 in materials cost. The total annual
burden imposed on non-depositories to provide the consumer rights disclosure would be
$259,771 in materials cost.
B. Obtaining and Furnishing Information about Covered Loans
i. One-time Burden
The Bureau estimates that 80 percent of small depositories, excluding those only making loans
under the principal step-down approach, would upgrade their systems to obtain consumer reports
reflecting loan applicants’ borrowing histories from a registered information system
automatically and to furnish certain information about covered short-term loans and covered
longer-term loans to each registered information system automatically. This burden has been
calculated in Section 12 for large depositories. The Bureau believes small non-depositories
would rely on licensed software. Depending on the nature of the software licensing agreement,
the Bureau estimates that the cost to upgrade this software would be $10,000 for lenders
licensing the software at the entity-level and $100 per seat for lenders licensing the software
using a seat-license contract. For respondents using seat-licensed software, the Bureau estimates
that each location for small non-depositories has on average three seats licensed. Given the price
differential between the entity-level licenses and the seat-license contracts, the Bureau believes
that only small lenders with a significant number of stores would rely on the entity-level licenses.
The Bureau estimates that 5 percent of the small respondents would rely on entity-level licenses
and the remaining 95 percent would rely on seat-license contracts. Only one-third of the total
estimated cost to implement these systems are attributed to the obtaining and furnishing of
information about covered loans provisions of the rule, as the Bureau believes these system
upgrades would address the provision regarding national credit reports and underwriting
documents, as well. To determine the annual cost burden, the Bureau distributes the one-time
cost over three years. The annualized one-time burden to upgrade systems would be $554,692 in
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material costs for non-depositories. Half of the $554,692 is attributed to the requirement to
obtain a consumer report from a registered information system, and the remaining half is
attributed to the requirement to furnish information to each registered information system.
ii. Ongoing Costs
Based on estimates from furnishers, obtaining a consumer report documenting the applicant’s
borrowing history would cost $0.50 per application. For the 119 million loans non-depositories
make that would require lenders to retrieve consumers’ borrowing history, the annual burden to
obtain applicants’ borrowing history would be $59,459,069 for the material cost of the reports.
The Bureau does not anticipate that there would be any material cost to furnish information to
each registered information system.
C. National Credit Report
i. One-time Burden
This burden has been calculated in Section 12 for large depositories. The Bureau estimates that
80 percent of small depositories would upgrade their systems to retrieve loan applicants’ national
credit report automatically. Following the methodology described in the “Obtaining and
Furnishing of Information about Covered Loans” section, the Bureau estimates the annualized
one-time burden for respondents to upgrade their systems to automatically retrieve loan
applicants’ national credit report would be $554,692 in material costs for non-depositories.
ii. Ongoing Costs
The Bureau estimates that it would cost $0.50 per application for large lenders and $1.95 per
application for small lenders to obtain a national credit report from a specialty consumer
reporting agency that has the consumer report information. For the 33 million loans nondepositories make that would be originated using the ability-to-repay requirements, to obtain the
national credit report information would impose an annual burden of $27,680,429 in materials
cost.
D. Underwriting Documents
i. One-time Burden
This burden has been calculated in Section 12 for large depositories. The Bureau estimates that
80 percent of small depositories would upgrade their systems to retrieve the various underwriting
documents from specialty consumer reporting agencies automatically. Following the
methodology described in the “Obtaining and Furnishing Information about Covered Loans”
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section, the Bureau estimates the annualized one-time burden for respondents to upgrade their
systems to automatically retrieve underwriting documents would be $554,692 in material costs
for non-depositories.
ii. Ongoing Costs
To request the estimated housing expense information from the specialty consumer reporting
agency would be $0.05 per application in addition to the cost of the consumer report information.
Although, the Bureau believes few entities would follow up with this procedure due to reasons
such as the allowance of relying on reasonable stated rental expenses, for non-depositories, the
Bureau provides a conservative estimate of the total annual burden to assess applicants’ housing
expenses would be $852,712 in materials cost.
E. Obtaining a New and Specific Authorization
Based on industry data and Bureau analysis, the Bureau uses estimates of the number of loan
payments that are made and the share of loan payments that fail twice in a row to determine the
number of times a respondent would need to obtain a new and specific authorization to withdraw
payment from a borrower’s deposit account. The Bureau estimates that about 4 percent of
payment requests would result in the need for a respondent to obtain a new and specific
authorization. For loans originated at a storefront location, the Bureau estimates 10 percent of
requests to obtain authorization would be delivered by mail and 90 percent of requests would be
delivered by e-mail. For loans originated online, the Bureau estimates that 100 percent of
requests would be delivered by e-mail. For each request delivered by mail, the Bureau estimates
it would cost the lenders $0.10 to include an additional page requesting the borrower to provide a
new and specific authorization while mailing the consumer rights notice. For the requests
delivered by e-mail, the Bureau believes lenders would send a separate e-mail from the consumer
rights notice requesting a new and specific authorization. For each e-mail, it would cost the
lender $0.01. The total annual burden imposed on depositories to request a new and specific
authorization would be $3,397 in materials cost. The total annual burden imposed on nondepositories to request a new and specific authorization would be $223,116 in materials cost.
F. Compliance Program and Record Retention
The Bureau estimates there would be no new cost burden associated with the compliance
program and record retention requirements of the rule.
G. Registered Information System
The Bureau estimates there would be no new cost burden associated with the registered
information system requirements of the rule.
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14. Estimated Cost to the Federal Government
There are no additional costs to the Federal Government.
15. Program Changes or Adjustments
Since this is a new information collection request associated with a new rulemaking, all the
burden considered in this request is considered to be a program change.
16. Plans for Tabulation, Statistical Analysis, and Publication
There are no plans to provide any publications based on the information collection of this
regulation.
17. Display of Expiration Date
The OMB control number and expiration date associated with this PRA submission will be
displayed on the Federal government’s electronic PRA docket at www.reginfo.gov, as well as in
the Code of Federal Regulations. There are no required forms or other documents upon which
display of the control number and expiration date would be appropriate.
18. Exceptions to the Certification Requirement
The Bureau certifies that this collection of information is consistent with the requirements of 5
CFR § 1320.9, and the related provisions of 5 CFR § 1320.8(b)(3) and is not seeking an
exemption to these certification requirements.
PART B: COLLECTIONS OF INFORMATION USING STATISTICAL METHODS
Not applicable. The information collections contained in this rule do not involve the use of
statistical methods.
###
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| File Type | application/pdf |
| Author | Taylor, Lauren (CFPB);[email protected] |
| File Modified | 2017-11-14 |
| File Created | 2017-11-14 |