The exemption threshold for financial regulations under TILA and CLA for consumer credit and lease transactions in 2023 will be increased to $59,000, reflecting the annual percentage change in the Consumer Price Index.

Enhanced Consumer Protection

The new dollar thresholds could increase consumer protection by expanding the number of financial transactions subject to regulation under the Truth in Lending Act (TILA) and the Consumer Leasing Act (CLA).

By raising the applicability dollar amount, more leases and credit transactions would be subject to detailed disclosures, creating a more transparent financing environment.

For instance, the Consumer Financial Protection Bureau's amendments to TLA, such as the Ability-to-Repay rule, ensure lenders thoroughly consider a consumer’s income, assets, savings, and other debt obligations before offering a mortgage.

Preventing Exploitation

The revised thresholds aim to prevent less reputable lenders from exploiting unsuspecting consumers. The Federal Trade Commission’s enforcement of TILA and CLA reduces chances of deceptive advertising by holding lenders accountable for presenting the cost and terms of credit or leases upfront and in a clear manner. This makes it harder for exploitative lenders to hide expensive conditions or fees in the fine print.

Encouraging Responsible Lending 

The applicability of the TILA and CLA promotes responsible lending and leasing practices. It obliges lenders to provide borrowers with sufficient information to make informed decisions. A real-world example is the annual percentage rate (APR), which encompasses all the costs of borrowing, consists of the interest rate, points, broker fees, and other charges. Outlining APRs can illustrate the true cost of credit and can deter consumers from entering into dangerously high-cost loans.

Our Opinion 

The revised regulations may either increase protections for their customers or add to their compliance and operational costs.

As a result, lenders will need to critically assess their processes and possibly modify their business strategies to ensure compliance, maintain competitiveness, and safeguard their consumer's interests amidst the new regulatory environment.

The raised dollar thresholds can result in the increased regulatory compliance burden for alternative lenders. Implementing newly required disclosure processes and ensuring compliance with these extensive regulations may increase operational costs, which could ultimately lead to higher interest rates or fees for consumers. Small lenders, particularly, might find it challenging to adapt to these changes due to their limited resources.

Headlines You Should Not Miss

Understanding the Implications of Moody's Negative US Credit Outlook The report highlights that Moody’s Investors Service has changed the US’s credit outlook to negative due to the country's ongoing fiscal challenges and potential policy gridlock under a split government. The author emphasizes that this move is significant as the credit rating can impact the interests on the U.S. Government's debt obligation and can also cause effects like a drop in the value of the dollar, and stock market volatility.

Top 20 SBA lenders for 2023 Each of the 20 lenders is shown with their base city, assets, net income, SBA loans approved between 2016 and 2017, SBA loans approved between 2017 and 2018, and total approval amounts. The lenders include companies like Wells Fargo, Live Oak Banking, and Newtek Small Business Finance.

Buy Now, Pay Later: Projecting a $960 Billion Market by 2028, Aided by Fintech Investments. The BNPL market is predicted to grow from its current valuation of $20 – $25 billion in 2021 to a massive $960 billion industry by 2028. The growth is accelerated due to increasing fintech start-up investments into the market, consumer demographic shifts towards younger generations, and adaptations for the COVID-19 pandemic. Key players in the industry are also highlighted, including Affirm, Afterpay, Klarna, Splitit, and more.

Rise in Consumer Credit Scores Showcases Economic Resilience amid Pandemic – FICO CEO Will Lansing notes that American consumers' credit scores have seen growth recently, characterized by more people moving into higher credit score ranges. This trend, as Lansing suggests, is a consequence of people being financially prudent during the pandemic and avoiding overspending.