3170-0NEW Payday NPRM RIN AA80_Supporting_Statement-OMB

NPRM RIN 3170-AA80 OMB Review Version

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: 3170-00XX)
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.
NOTE-TO-REVIEWERS
The collections of information related to the 2017 Final Rule (82 FR 54472) were previously
submitted to OMB in accordance with the Paperwork Reduction Act of 1995 (“PRA”) and
assigned OMB Control Number 3170-0065 for tracking purposes. The collection of information
is not yet active, however, as OMB has not yet approved the 2017 Final Rule information
collection request. The Bureau is issuing a new proposed rule (“2019 Proposed Rule,”
“proposal,” or “proposed rule”) on the same subject matter as the 2017 Final Rule. The 2019
Proposed Rule would retain certain associated information collections from the 2017 Final Rule,
which this supporting statement describes and analyzes. Generally, the 2019 Proposed Rule and
associated information collections would substantially revise or remove several of the
information collection requirements contained in the 2017 Final Rule. As such, the Bureau has
submitted this new information collection request associated with the 2019 Proposed Rule
seeking approval and a new OMB control number pursuant to section 3507(d) of the PRA.

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JUSTIFICATION
1. Circumstances Necessitating the Data Collection
The Bureau is issuing a proposed 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 current proposed rule would rescind the
determination that certain consumer credit transactions are unfair and abusive acts or practices
and likewise rescind the requirements for preventing such acts or practices, and the partial
conditional exemptions described in the 2017 Final Rule. This proposal preserves the 2017 Final
Rule’s requirements to ensure that the features of those consumer credit transactions are fully,
accurately, and effectively disclosed to consumers and mandates certain recordkeeping
requirements. The following statement describes the remaining impact the 2017 Final Rule is
expected to have with respect to the burdens and costs relevant to the reporting requirements
described in the Paperwork Reduction Act.
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
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 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.
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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.
2. Use of the Information
The Bureau’s proposed rulemaking includes information collection requirements related to (1)
upcoming payment notices (including unusual payment notices), and consumer rights notices;
and (2) retention of loan agreement obtained when making a covered short-term loan, covered
longer-term balloon payment loan, or covered longer-term installment loan, and payment
practices.
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.
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. 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. 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 § 1041.12 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
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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 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.
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.

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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, the Bureau has published a notice of proposed rulemaking
in the Federal Register inviting the public to comment on the information collection
requirements contained in the proposed rule. Comments received in response to the notice of
proposed rulemaking will be addressed in the preamble to the final rule.
9. Payments or Gifts to Respondents
Not applicable. No payment, gifts, or other incentives are provided to respondents.
10. Assurances of Confidentiality
The Bureau does not collect any information under this rule. 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
There is no information of a sensitive nature being requested by the bureau under this
information collection.
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
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 3,189,587 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.

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Exhibit 1: Burden Hour Summary 1
Information
Collection
Requirement
Disclosures
& 1041.9
Prohibited
payment transfer
attempts –
requirements and
conditions for
obtaining
consumer’s
authorization
[§ 1041.8]
Record Retention
[§ 1041.12] 3
Totals:

No. of
Respon
dents
9,045
9,045

9,887
9,887*

Type of IC

Frequency

Annual
Responses

3rd Party
Disclosure
Recordkeeping

On occasion

Recordkeeping

Annual
Burden
Hours
3,054,872

Hourly
Rate 2

231,732,981

Average
Response
Time
0.013

$21.19

Annual
Burden
Hour Costs
$64,723,890

On occasion

14,478,524

0.009

134,715

$25.54

$3,440,461

On occasion

120,085,002

0

0

$0

$0

366,296,507

3,189,587

*Note: Unduplicated count. Total number of entities that would be required to comply with this
regulation.
A. Disclosures
The rule requires notices related to lenders’ attempts to obtain payments on covered loans by
initiating withdrawals from borrowers’ deposit accounts or prepaid card accounts.
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
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.
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.
1

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.
2
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.
3
This information collection requires lenders to retain records of the loan and payments made under it for 36
months. The bureau believes that lenders do this for their own business purposes in the ordinary course of business
already and so is assigning zero burden to this information collection
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i. 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. 4
The Bureau estimates there would be no labor burden associated with these payments
disclosures.
ii. 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 a New and Specific Authorization
After a respondent has made two consecutive unsuccessful attempts to withdraw payment for a
4

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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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
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.
C. Recordkeeping Requirements
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. Section 1041.12 provides that a
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lender making a covered loan must develop and follow written policies and procedures that are
reasonably designed to ensure compliance with the requirements of part 1041. Section
1041.12(b) provides that a lender must retain evidence of compliance with part 1041 for 36
months after the date on which a covered loan ceases to be an outstanding loan. Section
1041.12(b)(1) through (4) sets forth particular requirements for retaining specific records,
including retention of the loan agreement and documentation obtained in connection with
originating a covered short-term or longer-term balloon-payment loan (§ 1041.12(b)(1));
retention of electronic records in tabular format for covered short-term or longer-term balloonpayment loans regarding origination calculations and determinations under § 1041.5 ((§
1041.12(b)(2)) and as well as type, terms, and performance (§ 1041.12(b)(3)); and retention of
records relating to payment practices for covered loans (§ 1041.12(b)(4).
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 $11,188,035. For the Bureau institutions subject to this rule, the total
estimated cost burden annually would be approximately $4,698,455. 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
& 1041.9]
Prohibited payment transfer attempts –
requirements and conditions for
obtaining consumer’s authorization
[§ 1041.8]
Totals:

5

Per Unit
Costs

Quantity

Total Cost

$0.05

231,732,981

$10,961,522

$0.02

14,478,524

$226,513

366,296,507

$11,188,035

5

Per unit cost estimates are subject to rounding error because they are derived from the quantity and total cost
estimates.
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A. Disclosures
i. 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.
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.
ii. 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.
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. However this Proposed
Rule (RIN 3170-AA80) would substantially reduce the burdens associated with the current rule
for 12 CFR § 1041 for which an information collection request is currently still pending at OMB
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under OMB number 3170-0065. The proposed rule could result in a burden reduction of 5,
010,232 hours (from 8,199,819 to 3,189,587) and 89,656,332 cost burden (from $100,844,367 to
$11,188,035) from what the Bureau estimated for the burdens associated with current rule.
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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