If you already know how dollar loans online can help you, then you certainly deem them ideal. Whether you’re a borrower or lender, it is essential that you have a clear insight into everything transpiring before taking the next step of action. That’s where the Small Dollar Lending Rule comes into the fray.
Well, this rule aims to protect consumers from the potentially harmful practices related with payday loans, vehicle title loans, deposit advance products, and some high-cost installment loans. Here are a few things you should know about the small dollar lending rule.
Which Loans are Covered Under the Rule?
It is essential that you not need to focus on the amount of the loan or type of loan, since those definitions and guidelines can quickly blur. Rather, one should pay close attention to the term and APR of the loan, together with the repayment structure. At the moment, there are three main categories of covered loans under the Rule.
This includes short-terms loans with a team of 45 days or less and longer-term ballon-payment loans with a term of greater than 45 days and where one or more payments is twice as large as another payment.
Things are not any different for longer-term loans with an APR of greater than 36% and where the lender can initiate transfers from the consumer’s account without further action by the consumer.
What Are the Provisions of the Rule?
The payment provisions are designed to protect consumers from repeated, unsuccessful payments attempts and do away with excessive fees and bank account closures. The rule restricts lenders from trying to withdraw payment from a borrower’s account after two consecutive failed payment transfers unless the borrower offers new authorization for one third attempt.
What this simply implies is that any two consecutive declines on a borrower’s bank account despite the payment method use should lead to discontinuation of any future attempts to debit that borrower’s account.
Strategies to Consider
While you already know how dollar loans online can help you, as a lender, it is important to understand and adhere to this new Rule to safeguard both your business and your borrowers. In this regard, you should make it the norm to monitor payment attempts across all payment modalities.
The ideal way to go about this lies in implementing robust systems to track payment transfers, ensuring no more than two consecutive failed payment transfers are made to a borrower’s bank account without getting new authorization from the borrower.
Moreover, you should develop clear procedures to offer the required advance notice before trying a withdrawal detailing the payment amount, date, and other relevant info. Remember, transparency is essential for building trust and ensuring compliances.
For this reason, you should clearly disclose all loan terms, costs, and fees to borrowers in a way that is easily understandable and use prescribed formats for disclosures and notices to ensure clarity and completeness. In so doing, you will certainly have an easy time.
