Payday Loan Renewals and Rewrites

Guidelines pertaining to the deferrals, renewals, rewrites and extensions payday loans have been established by the Retail Classification Policy. Borrowers who apply for and subsequently receive approved short-term payday loans as they are defined should exhibit the ability and a willingness to repay the loan at the inception date and upon the maturity date when requesting an extension, deferral, renewal or a rewrite of the loan. At the same time, examiners should pay close attention to the institutions offering the lending practices and ensure that they are compliant with the standards set forth in the Retail Classification Policy. Institution standards should include the following:

The number of deferrals, rewrites, extensions and renewal should be limited in nature.
Additional advances to finance any accrued fees, interest associated, and simultaneous loans to the same customer should be prohibited.
Institutions should be certain that reporting, internal controls and effective, comprehensive risk management procedures are in place and strictly followed.
In addition to the practices detailed above, payday loan providers should adhere to:

Set forth a specific period of time, or waiting period within which a payday loan is repaid and any additional loan application is filed.
Establish within a calendar year, the maximum number of payday loans allowed per customer.
Ensure that at any one time, any one customer has not established more than one outstanding loan with the bank or other third party lending institution.
Require that the issuance of payday loans is NOT approved to any customer who has had an outstanding loan for a period of 3 months or more, within any previous concurrent 12 month period. The individual customer’s frequency of the lending practice should be considered when determining the calculation of said three month period
When any one customer has acquired a payday loan for a period of three months within the last 12 months from the date of any loan application, lending institutions should offer the customer alternative for longer-term lending or refer them to another business offering longer-term credit services perhaps better suited for the customer’s financial standing and borrowing needs. Under such circumstances, regardless of the lenders ability to offer alternatives, any extension, deferral or renewal or rewrite of a payday loan should not be authorized.