PART 1041—PAYDAY, VEHICLE TITLE, AND CERTAIN HIGH-COST INSTALLMENT LOANS Authority: 12 U.S.C. 5511, 5512, 5514(b), 5531(b), (c), and (d), 5532. Source: 82 FR 54871, Nov. 17, 2017, unless otherwise noted. Subpart A—General § 1041.1 Authority and purpose. (a) Authority. et seq. (b) Purpose. [82 FR 54871, Nov. 17, 2017, as amended at 85 FR 44444, July 22, 2020] § 1041.2 Definitions. (a) Definitions. (1) Account (2) Affiliate (3) Closed-end credit (4) Consumer (5) Consummation (6) Cost of credit (i) Charges included in the cost of credit. (ii) Calculation of the cost of credit Closed-end credit. (B) Open-end credit. (7) Covered longer-term balloon-payment loan (8) Covered longer-term loan (9) [Reserved] (10) Covered short-term loan (11) Credit (12) Electronic fund transfer (13) Lender (14) [Reserved] (15) Motor vehicle (16) Open-end credit (17) Outstanding loan (18) Service provider (19) [Reserved] (b) Rule of construction. [82 FR 54871, Nov. 17, 2017, as amended at 84 FR 27929, June 17, 2019; 85 FR 44444, July 22, 2020] § 1041.3 Scope of coverage; exclusions; exemptions. (a) General. (b) Covered loan. (1) For closed-end credit that does not provide for multiple advances to consumers, the consumer is required to repay substantially the entire amount of the loan within 45 days of consummation, or for all other loans, the consumer is required to repay substantially the entire amount of any advance within 45 days of the advance; (2) For loans not otherwise covered by paragraph (b)(1) of this section: (i) For closed-end credit that does not provide for multiple advances to consumers, the consumer is required to repay substantially the entire balance of the loan in a single payment more than 45 days after consummation or to repay such loan through at least one payment that is more than twice as large as any other payment(s). (ii) For all other loans, either: (A) The consumer is required to repay substantially the entire amount of an advance in a single payment more than 45 days after the advance is made or is required to make at least one payment on the advance that is more than twice as large as any other payment(s); or (B) A loan with multiple advances is structured such that paying the required minimum payments may not fully amortize the outstanding balance by a specified date or time, and the amount of the final payment to repay the outstanding balance at such time could be more than twice the amount of other minimum payments under the plan; or (3) For loans not otherwise covered by paragraph (b)(1) or (2) of this section, if both of the following conditions are satisfied: (i) The cost of credit for the loan exceeds 36 percent per annum, as measured: (A) At the time of consummation for closed-end credit; or (B) At the time of consummation and, if the cost of credit at consummation is not more than 36 percent per annum, again at the end of each billing cycle for open-end credit, except that: ( 1 ( 2 (ii) The lender or service provider obtains a leveraged payment mechanism as defined in paragraph (c) of this section. (c) Leveraged payment mechanism. (d) Exclusions for certain types of credit. (1) Certain purchase money security interest loans. (2) Real estate secured credit. (3) Credit cards. (4) Student loans. (5) Non-recourse pawn loans. (6) Overdraft services and lines of credit. (7) Wage advance programs. (i) The advance is made only against the accrued cash value of any wages the employee has earned up to the date of the advance; and (ii) Before any amount is advanced, the entity advancing the funds warrants to the consumer as part of the contract between the parties on behalf of itself and any business partners, that it or they, as applicable: (A) Will not require the consumer to pay any charges or fees in connection with the advance, other than a charge for participating in the wage advance program; (B) Has no legal or contractual claim or remedy against the consumer based on the consumer's failure to repay in the event the amount advanced is not repaid in full; and (C) With respect to the amount advanced to the consumer, will not engage in any debt collection activities if the advance is not deducted directly from wages or otherwise repaid on the scheduled date, place the amount advanced as a debt with or sell it to a third party, or report to a consumer reporting agency concerning the amount advanced. (8) No-cost advances. (i) That it has no legal or contractual claim or remedy against the consumer based on the consumer's failure to repay in the event the amount advanced is not repaid in full; and (ii) That, with respect to the amount advanced to the consumer, such entity will not engage in any debt collection activities if the advance is not repaid on the scheduled date, place the amount advanced as a debt with or sell it to a third party, or report to a consumer reporting agency concerning the amount advanced. (e) Alternative loan. Alternative loan (1) Loan term conditions. (i) The loan is not structured as open-end credit, as defined in § 1041.2(a)(16); (ii) The loan has a term of not less than one month and not more than six months; (iii) The principal of the loan is not less than $200 and not more than $1,000; (iv) The loan is repayable in two or more payments, all of which payments are substantially equal in amount and fall due in substantially equal intervals, and the loan amortizes completely during the term of the loan; and (v) The lender does not impose any charges other than the rate and application fees permissible for Federal credit unions under regulations issued by the National Credit Union Administration at 12 CFR 701.21(c)(7)(iii). (2) Borrowing history condition. (3) Income documentation condition. (4) Safe harbor. (f) Accommodation loans. Accommodation loan (1) The lender and its affiliates collectively have made 2,500 or fewer covered loans in the current calendar year, and made 2,500 or fewer such covered loans in the preceding calendar year; and (2)(i) During the most recent completed tax year in which the lender was in operation, if applicable, the lender and any affiliates that were in operation and used the same tax year derived no more than 10 percent of their receipts from covered loans; or (ii) If the lender was not in operation in a prior tax year, the lender reasonably anticipates that the lender and any of its affiliates that use the same tax year will derive no more than 10 percent of their receipts from covered loans during the current tax year. (3) Provided, however, that covered longer-term loans for which all transfers meet the conditions in § 1041.8(a)(1)(ii), and receipts from such loans, are not included for the purpose of determining whether the conditions of paragraphs (f)(1) and (2) of this section have been satisfied. (g) Receipts. (h) Tax year. [82 FR 54871, Nov. 17, 2017, as amended at 84 FR 27929, June 17, 2019] Subpart B [Reserved] Subpart C—Payments § 1041.7 Identification of unfair and abusive practice. It is an unfair and abusive practice for a lender to make attempts to withdraw payment from consumers' accounts in connection with a covered loan after the lender's second consecutive attempts to withdraw payments from the accounts from which the prior attempts were made have failed due to a lack of sufficient funds, unless the lender obtains the consumers' new and specific authorization to make further withdrawals from the accounts. § 1041.8 Prohibited payment transfer attempts. (a) Definitions. (1) Payment transfer (i) Means of transfer. (A) Electronic fund transfer, including a preauthorized electronic fund transfer as defined in Regulation E, 12 CFR 1005.2(k). (B) Signature check, regardless of whether the transaction is processed through the check network or another network, such as the automated clearing house (ACH) network. (C) Remotely created check as defined in Regulation CC, 12 CFR 229.2(fff). (D) Remotely created payment order as defined in 16 CFR 310.2(cc). (E) When the lender is also the account-holder, an account-holding institution's transfer of funds from a consumer's account held at the same institution, other than such a transfer meeting the description in paragraph (a)(1)(ii) of this section. (ii) Conditional exclusion for certain transfers by account-holding institutions. (A) The lender, pursuant to the terms of the loan agreement or account agreement, does not charge the consumer any fee, other than a late fee under the loan agreement, in the event that the lender initiates a transfer of funds from the consumer's account in connection with the covered loan for an amount that the account lacks sufficient funds to cover. (B) The lender, pursuant to the terms of the loan agreement or account agreement, does not close the consumer's account in response to a negative balance that results from a transfer of funds initiated in connection with the covered loan. (2) Single immediate payment transfer at the consumer's request (i) A payment transfer initiated by a one-time electronic fund transfer within one business day after the lender obtains the consumer's authorization for the one-time electronic fund transfer. (ii) A payment transfer initiated by means of processing the consumer's signature check through the check system or through the ACH system within one business day after the consumer provides the check to the lender. (b) Prohibition on initiating payment transfers from a consumer's account after two consecutive failed payment transfers General. (2) Consecutive failed payment transfers. (i) First failed payment transfer. (A) The lender has initiated no other payment transfer from the account in connection with the covered loan or any other covered loan that the consumer has with the lender. (B) The immediately preceding payment transfer was successful, regardless of whether the lender has previously initiated a first failed payment transfer. (C) The payment transfer is the first payment transfer to fail after the lender obtains the consumer's authorization for additional payment transfers pursuant to paragraph (c) of this section. (ii) Second consecutive failed payment transfer. (iii) Different payment channel. (c) Exception for additional payment transfers authorized by the consumer General. (2) General authorization requirements and conditions Required payment transfer terms. (ii) Application of specific date requirement to re-initiating a returned payment transfer. (iii) Special authorization requirements and conditions for payment transfers to collect a late fee or returned item fee. (3) Requirements and conditions for obtaining the consumer's authorization General. (ii) Provision of payment transfer terms to the consumer. (A) In writing, by mail or in person, or in a retainable form by email if the consumer has consented to receive electronic disclosures in this manner under § 1041.9(a)(4) or agrees to receive the terms and statement by email in the course of a communication initiated by the consumer in response to the consumer rights notice required by § 1041.9(c). (B) By oral telephone communication, if the consumer affirmatively contacts the lender in that manner in response to the consumer rights notice required by § 1041.9(c) and agrees to receive the terms and statement in that manner in the course of, and as part of, the same communication. (iii) Signed authorization required General. (B) Special requirements for authorization obtained by oral telephone communication. (C) Memorialization required. (4) Expiration of authorization. (i) The lender subsequently obtains a new authorization from the consumer pursuant to this paragraph (c); or (ii) Two consecutive payment transfers initiated pursuant to the consumer's authorization fail, as specified in paragraph (b) of this section. (d) Exception for initiating a single immediate payment transfer at the consumer's request. (1) The payment transfer is a single immediate payment transfer at the consumer's request as defined in paragraph (a)(2) of this section; and (2) The consumer authorizes the underlying one-time electronic fund transfer or provides the underlying signature check to the lender, as applicable, no earlier than the date on which the lender provides to the consumer the consumer rights notice required by § 1041.9(c) or on the date that the consumer affirmatively contacts the lender to discuss repayment options, whichever date is earlier. (e) Prohibition against evasion. § 1041.9 Disclosure of payment transfer attempts. (a) General form of disclosures Clear and conspicuous. (2) In writing or electronic delivery. (3) Retainable. (4) Electronic delivery. (i) Consumer consent General. (B) Email option required. (ii) Subsequent loss of consent. (A) The consumer revokes consent to receive disclosures through that delivery method; or (B) The lender receives notification that the consumer is unable to receive disclosures through that delivery method at the address or number used. (5) Segregation requirements for notices. (6) Machine readable text in notices provided through electronic delivery. (7) Model forms Payment notice. (ii) Consumer rights notice. (iii) Electronic short notice. (8) Foreign language disclosures. (b) Payment notice General. (i) First payment withdrawal (ii) Unusual withdrawal (iii) Exceptions. (A) The initial payment transfer from a consumer's account after obtaining consumer authorization pursuant to § 1041.8(c), regardless of whether any of the conditions in paragraph (b)(3)(ii)(C) of this section apply; or (B) A single immediate payment transfer initiated at the consumer's request in accordance with § 1041.8(a)(2). (2) First payment withdrawal notice Timing Mail. (B) Electronic delivery. 1 ( 2 (C) In person. (ii) Content requirements. (A) Identifying statement. (B) Transfer terms 1 Date. ( 2 Amount. ( 3 Consumer account. ( 4 Loan identification information. ( 5 Payment channel. ( 6 Check number. (C) Payment breakdown. ( 1 Payment breakdown heading. ( 2 Principal. ( 3 Interest. ( 4 Fees. ( 5 Other charges. ( 6 Amount. 2 ( 7 Explanation of interest-only or negatively amortizing payment. (D) Lender name and contact information. (3) Unusual withdrawal notice Timing Mail. (B) Electronic delivery. 1 ( 2 (C) In person. (D) Exception for open-end credit. (ii) Content requirements. (A) Identifying statement. (B) Basic payment information. (C) Description of unusual withdrawal. ( 1 Varying amount i General. ( ii Open-end credit. ( 2 Date other than date of regularly scheduled payment. ( 3 Different payment channel. ( 4 For purpose of re-initiating returned transfer. (4) Electronic delivery General. (ii) Electronic short notice General content. ( 1 Identifying statement, ( 2 Transfer terms i Date, 1 ( ii Amount, 2 ( iii Consumer account, 3 ( 3 Web site URL. (B) Additional content requirements. ( 1 Varying amount, 1 ( 2 Date other than due date of regularly scheduled payment, 2 ( 3 Different payment channel, 3 (iii) Email delivery. (c) Consumer rights notice General. (2) Timing. (3) Content requirements. (i) Identifying statement. (ii) Last two attempts were returned. (iii) Consumer account. (iv) Loan identification information. (v) Statement of Federal law prohibition. (vi) Contact about choices. (vii) Previous unsuccessful payment attempts. (A) Previous payment attempts heading. (B) Payment due date. (C) Date of attempt. (D) Amount. (E) Fees. (viii) CFPB information. www.cfpb.gov/payday. (4) Electronic delivery General. (ii) Electronic short notice Content. ( 1 Identifying statement. ( 2 Last two attempts were returned. ( 3 Consumer account. ( 4 Statement of Federal law prohibition. ( 5 Web site URL. (B) [Reserved] (iii) Email delivery. [82 FR 54871, Nov. 17, 2017, as amended at 84 FR 27929, June 17, 2019] Subpart D—Recordkeeping, Anti-Evasion, Severability, and Dates §§ 1041.10-1041.11 [Reserved] § 1041.12 Compliance program and record retention. (a) Compliance program. (b) Record retention. (1) Retention of loan agreement for covered loans. (2)-(3) [Reserved] (4) Retention of records relating to payment practices for covered loans. (i) Leveraged payment mechanism(s) obtained by the lender from the consumer; (ii) Authorization of additional payment transfer, as described in § 1041.8(c)(3)(iii); and (iii) Underlying one-time electronic transfer authorization or underlying signature check, as described in § 1041.8(d)(2). (5) Electronic records in tabular format regarding payment practices for covered loans. (i) History of payments received and attempted payment transfers, as defined in § 1041.8(a)(1), including: (A) Date of receipt of payment or attempted payment transfer; (B) Amount of payment due; (C) Amount of attempted payment transfer; (D) Amount of payment received or transferred; and (E) Payment channel used for attempted payment transfer. (ii) If an attempt to transfer funds from a consumer's account is subject to the prohibition in § 1041.8(b)(1), whether the lender or service provider obtained authorization to initiate a payment transfer from the consumer in accordance with the requirements in § 1041.8(c) or (d). [82 FR 54871, Nov. 17, 2017, as amended at 85 FR 44444, July 22, 2020] § 1041.13 Prohibition against evasion. A lender must not take any action with the intent of evading the requirements of this part. § 1041.14 Severability. The provisions of this part are separate and severable from one another. If any provision is stayed or determined to be invalid, the remaining provisions shall continue in effect. § 1041.15 Effective and compliance dates. (a) Effective date. (b) April 16, 2018 application deadline. (c) August 19, 2019 compliance date. [84 FR 27929, June 17, 2019, as amended at 85 FR 44445, July 22, 2020] Appendix A to Part 1041—Model Forms A-1 and A-2 Model Forms [Reserved] A-3 Model Form for First Payment Withdrawal Notice Under § 1041.9( b A-4 Model Form for Unusual Withdrawal Notice Under § 1041.9( b A-5 Model Form for Consumer Rights Notice Under § 1041.9( c A-6 Model Clause for First Payment Withdrawal Electronic Short Notice Under § 1041.9( b A-7 Model Clause for Unusual Withdrawal Electronic Short Notice Under § 1041.9( c ii A-8 Model Clause for Consumer Rights Electronic Short Notice Under § 1041.9( c [82 FR 54871, Nov. 17, 2017, as amended at 84 FR 27929, June 17, 2019; 85 FR 44445, July 22, 2020] Supplement I to Part 1041—Official Interpretations Section 1041.2—Definitions 2(a)(3) Closed-End Credit 1. In general. 2(a)(5) Consummation 1. New loan. 2(a)(11) Credit 1. In general. 2(a)(12) Electronic Fund Transfer 1. In general. 2(a)(13) Lender 1. Regularly extends credit. 2(a)(16) Open-End Credit 1. In general. 2(a)(17) Outstanding Loan 1. Payments owed to third parties. 2. Stale loans. 2(a)(18) Service Provider 1. Credit access businesses and credit services organizations. 2(b) Rule of Construction 1. Incorporation of terms from underlying statutes and regulations. Section 1041.3—Scope of Coverage; Exclusions; Exemptions 3(b) Covered Loans 1. Credit structure. 2. Primary purpose. Paragraph 3(b)(1) 1. Closed-end credit that does not provide for multiple advances to consumers. 2. Loans that provide for multiple advances to consumers. i. Under a closed-end commitment, the lender might agree to lend a total of $1,000 in a series of advances as needed by the consumer. When a consumer has borrowed the full $1,000, no more is advanced under that particular agreement, even if there has been repayment of a portion of the debt. 3. Facts and circumstances test for determining whether loan is substantially repayable within 45 days. 4. Deposit advance products. 5. Loans with alternative, ambiguous, or unusual payment schedules. Paragraph 3(b)(2) 1. Closed-end credit that does not provide for multiple advances to consumers. See 2. Payments more than twice as large as other payments. 3. Charges excluded. 4. Multiple-advance structures. i. The consumer is required to repay substantially the entire amount of an advance more than 45 days after the advance is made or is required to make at least one payment on the advance that is more than twice as large as any other payment; or ii. A loan with multiple advances is structured such that paying the required minimum payment may not fully amortize the outstanding balance by a specified date or time, and the amount of the final payment to repay the outstanding balance at such time could be more than twice the amount of other minimum payments under the plan. For example, the lender extends an open-end credit plan with a $500 credit limit, monthly billing cycles, and a minimum payment due each billing cycle that is equal to 10% of the outstanding principal. Fees or interest on the plan are equal to 10% of the outstanding principal per month, so that if a consumer pays nothing other than the minimum payment amount, the outstanding principal remains the same. All outstanding amounts must be repaid within six months of the advance. The credit plan is a covered loan under § 1041.3(b)(2)(ii) because if the consumer drew the entire amount at one time and then made only minimum payments, the sixth payment would be more than twice the amount of the minimum payment required ($50). Paragraph 3(b)(3) 1. Conditions for coverage of a longer-term loan. 2. No balance during a billing cycle. 1 3. Timing for coverage determination. i. A lender originates a closed-end loan that is not a longer-term balloon-payment loan to be repaid within six months of consummation with a cost of credit equal to 60 percent. At the time of consummation, the loan is not a covered longer-term loan because it does not have a leveraged payment mechanism. After two weeks, the lender obtains a leveraged payment mechanism. The loan is now a covered longer-term loan because it meets both of the requirements of § 1041.3(b)(3)(i) and (ii). ii. A lender extends an open-end credit plan with monthly billing cycles and a leveraged payment mechanism. At consummation and again at the end of the first billing cycle, the plan is not a covered longer-term loan because its cost of credit is below 36 percent. In the second billing cycle, the plan's cost of credit is 45 percent because several fees are triggered in addition to interest on the principal balance. The plan is now a covered longer-term loan because it meets both of the requirements of § 1041.3(b)(3)(i) and (ii). Beginning on the first day of the third billing cycle, and thereafter for the duration of the plan, the lender must therefore comply with the requirements of this part including by, for example, providing a first withdrawal notice before initiating the first payment transfer on or after the first day of the third billing cycle. The requirements to provide certain payment withdrawal notices under § 1041.9 have been structured so that the notices can be provided in the same mailing as the periodic statements that are required by Regulation Z, 12 CFR 1026.7(b). See, e.g., Paragraph 3(b)(3)(ii) 1. Timing. 2. Leveraged payment mechanism in contract. i. Future authorization. ii. Delinquency or default provisions. Paragraph 3(c) 1. Initiating a transfer of money from a consumer's account. 2. Lender-initiated transfers. i. Check. ii. Electronic fund transfer authorization. iii. Remotely created checks and remotely created payment orders. iv. Transfer by account-holding institution. 3. Single immediate payment transfer at the consumer's request excluded. 4. Transfers not initiated by the lender. 3(d) Exclusions 3(d)(1) Certain Purchase Money Security Interest Loans 1. “Sole purpose” test. 3(d)(2) Real Estate Secured Credit 1. Real estate and dwellings. 3(d)(5) Non-Recourse Pawn Loans 1. Lender possession required and no recourse permitted. 3(d)(6) Overdraft Services 1. Definitions. 3(d)(7) Wage Advance Programs 1. Advances of wages under § 1041.3(d)(7) must be offered by an employer, as defined in the Fair Labor Standards Act, 29 U.S.C. 203(d), or by the employer's business partner to the employer's employees pursuant to a wage advance program. For example, an advance program might be offered by a company that provides payroll card services or accounting services to the employer, or by the employer with the assistance of such a company. Similarly, an advance program might be offered by a company that provides consumer financial products and services as part of the employer's benefits program, such that the company would have information regarding the wages accrued by the employee. Paragraph 3(d)(7)(i) 1. Under the exclusion in § 1041.3(d)(7)(i), the advance must be made only against accrued wages. To qualify for that exclusion, the amount advanced must not exceed the amount of the employee's accrued wages. Accrued wages are wages that the employee is entitled to receive under State law in the event of separation from the employer for work performed for the employer, but for which the employee has yet to be paid. Paragraph 3(d)(7)(ii)(B) 1. Under § 1041.3(d)(7)(ii)(B), the entity advancing the funds is required to warrant that it has no legal or contractual claim or remedy against the consumer based on the consumer's failure to repay in the event the amount advanced is not repaid in full. This provision does not prevent the entity from obtaining a one-time authorization to seek repayment from the consumer's transaction account. 3(d)(8) No-Cost Advances 1. Under § 1041.3(d)(8)(i), the entity advancing the funds is required to warrant that it has no legal or contractual claim or remedy against the consumer based on the consumer's failure to repay in the event the amount advanced is not repaid in full. This provision does not prevent the entity from obtaining a one-time authorization to seek repayment from the consumer's transaction account. 3(e) Alternative Loans 1. General. 3(e)(1) Loan Term Conditions Paragraph 3(e)(1)(iv) 1. Substantially equal payments. 2. Substantially equal intervals. 3. Amortization. Paragraph 3(e)(1)(v) 1. Cost of credit. 3(e)(2) Borrowing History Condition 1. Relevant records. 2. Determining 180-day period. 3. Total number of loans made under § 1041.3(e)(2). See 4. Example. 3(e)(3) Income Documentation Condition 1. General. 3(f) Accommodation Lending 1. General. 2. Reasonable anticipation of receipts for current tax year. Section 1041.7—Identification of Unfair and Abusive Practice 1. General. Section 1041.8—Prohibited Payment Transfer Attempts 8(a) Definitions 8(a)(1) Payment Transfer 1. Lender-initiated. 2. Any amount due. i. A transfer for the amount of a scheduled payment due under a loan agreement for a covered loan. ii. A transfer for an amount smaller than the amount of a scheduled payment due under a loan agreement for a covered loan. iii. A transfer for the amount of the entire unpaid loan balance collected pursuant to an acceleration clause in a loan agreement for a covered loan. iv. A transfer for the amount of a late fee or other penalty assessed pursuant to a loan agreement for a covered loan. 3. Amount purported to be due. 4. Transfers of funds not initiated by the lender. i. A consumer, on her own initiative or in response to a request or demand from the lender, makes a payment to the lender in cash withdrawn by the consumer from the consumer's account. ii. A consumer makes a payment via an online or mobile bill payment service offered by the consumer's account-holding institution. iii. The lender seeks repayment of a covered loan pursuant to a valid court order authorizing the lender to garnish a consumer's account. Paragraph 8(a)(1)(i)(A) 1. Electronic fund transfer. Paragraph 8(a)(1)(i)(B) 1. Signature check. Paragraph 8(a)(1)(i)(E) 1. Transfer by account-holding institution. 2. Examples. i. Initiating an internal transfer from a consumer's account to collect a scheduled payment on a covered loan. ii. Sweeping the consumer's account in response to a delinquency on a covered loan. iii. Exercising a right of offset to collect against an outstanding balance on a covered loan. Paragraph 8(a)(1)(ii) Conditional Exclusion for Certain Transfers by Account-Holding Institutions 1. General. Paragraph 8(a)(1)(ii)(A) 1. Terms of loan agreement or account agreement. 2. Fees prohibited. Paragraph 8(a)(1)(ii)(B) 1. General. 2. Terms of loan agreement or account agreement. 8(a)(2) Single Immediate Payment Transfer at the Consumer's Request Paragraph 8(a)(2)(i) 1. Time of initiation. Paragraph 8(a)(2)(ii) 1. Time of processing. 2. Check provided by mail. 8(b) Prohibition on Initiating Payment Transfers From a Consumer's Account After Two Consecutive Failed Payment Transfers 1. General. 2. Account. 3. More than one covered loan. 4. Application to bona fide subsequent loan. 8(b)(1) General 1. Failed payment transfer. 2. Date received. 3. Return for other reason. 4. Failed payment transfer initiated by a lender that is the consumer's account-holding institution. 8(b)(2) Consecutive Failed Payment Transfers 8(b)(2)(i) First Failed Payment Transfer 1. Examples. i. A lender, having made no other attempts, initiates an electronic fund transfer to collect the first scheduled payment due under a loan agreement for a covered loan, which results in a return for nonsufficient funds. The failed transfer is the first failed payment transfer. The lender, having made no attempts in the interim, re-presents the electronic fund transfer and the re-presentment results in the collection of the full payment. Because the subsequent attempt did not result in a return for nonsufficient funds, the number of consecutive failed payment transfers resets to zero. The following month, the lender initiates an electronic fund transfer to collect the second scheduled payment due under the covered loan agreement, which results in a return for nonsufficient funds. That failed transfer is a first failed payment transfer. ii. A storefront lender, having made no prior attempts, processes a consumer's signature check through the check system to collect the first scheduled payment due under a loan agreement for a covered loan. The check is returned for nonsufficient funds. This constitutes the first failed payment transfer. The lender does not thereafter convert and process the check through the ACH system, or initiate any other type of payment transfer, but instead contacts the consumer. At the lender's request, the consumer comes into the store and makes the full payment in cash withdrawn from the consumer's account. The number of consecutive failed payment transfers remains at one, because the consumer's cash payment was not a payment transfer as defined in § 1041.8(a)(2). 8(b)(2)(ii) Second Consecutive Failed Payment Transfer 1. General. i. Assume that a consumer has only one covered loan with a lender. The lender, having initiated no other payment transfer in connection with the covered loan, initiates an electronic fund transfer to collect the first scheduled payment due under the loan agreement. The transfer is returned for nonsufficient funds. The returned transfer is the first failed payment transfer. The lender next initiates an electronic fund transfer for the following scheduled payment due under the loan agreement for the covered loan, which is also returned for nonsufficient funds. The second returned transfer is the second consecutive failed payment transfer. ii. Assume that a consumer has two covered loans, Loan A and Loan B, with a lender. Further assume that the lender has initiated no failed payment transfers in connection with either covered loan. On the first of the month, the lender initiates an electronic fund transfer to collect a regularly scheduled payment on Loan A, resulting in a return for nonsufficient funds. The returned transfer is the first failed payment transfer. Two weeks later, the lender, having initiated no further payment transfers in connection with either covered loan, initiates an electronic fund transfer to collect a regularly scheduled payment on Loan B, also resulting in a return for nonsufficient funds. The second returned transfer is the second consecutive failed payment transfer, and the lender is thus prohibited under § 1041.8(b) from initiating further payment transfers in connection with either covered loan. 2. Previous payment transfer. 3. Application to exception in § 1041.8(d). 8(b)(2)(iii) Different Payment Channel 1. General. 8(c) Exception for Additional Payment Transfers Authorized by the Consumer 1. General. 8(c)(1) General 1. Consumer's underlying payment authorization or instrument still required. 8(c)(2) General Authorization Requirements and Conditions 8(c)(2)(i) Required Payment Transfer Terms 1. General. 2. Specific date. 3. Amount larger than specific amoun 4. Smaller amount. 8(c)(2)(iii) Special Authorization Requirements and Conditions for Payment Transfers To Collect a Late Fee or Returned Item Fee 1. General. 2. Highest amount. 3. Varying fee amounts. 8(c)(3) Requirements and Conditions for Obtaining the Consumer's Authorization 8(c)(3)(ii) Provision of Payment Transfer Terms to the Consumer 1. General. 2. Different options. Paragraph 8(c)(3)(ii)(A) 1. Request by email. i. After a lender provides the consumer rights notice in § 1041.9(c) by mail to a consumer who has not consented to receive electronic disclosures under § 1041.9(a)(4), the consumer calls the lender to discuss her options for repaying the loan, including the option of authorizing additional payment transfers pursuant to § 1041.8(c). In the course of the call, the consumer asks the lender to provide the request for the consumer's authorization via email. Because the consumer has agreed to receive the request via email in the course of a communication initiated by the consumer in response to the consumer rights notice, the lender is permitted under § 1041.8(c)(3)(ii)(A) to provide the request to the consumer by that method. 2. E-Sign Act does not apply to provision of terms and statement. See 3. Same communication. Paragraph 8(c)(3)(ii)(B) 1. Request by oral telephone communication. 8(c)(3)(iii) Signed Authorization Required 8(c)(3)(iii)(A) General 1. E-Sign Act signature requirements. 2. Consumer's affirmative response to the notice. 8(c)(3)(iii)(C) Memorialization Required 1. Timing. 2. Form of memorialization. 3. Electronic delivery. 8(d) Exception for Initiating a Single Immediate Payment Transfer at the Consumer's Request 1. General. 2. Application of prohibition. 3. Timing. 8(e) Prohibition Against Evasion 1. General. 2. Illustrative example. Section 1041.9—Disclosure of Payment Transfer Attempts 1. General. 9(a) General Form of Disclosures 9(a)(1) Clear and Conspicuous 1. Clear and conspicuous standard. 9(a)(2) In Writing or Electronic Delivery 1. Electronic delivery. et seq. 9(a)(3) Retainable 1. General. 9(a)(4) Electronic Delivery 1. General. 9(a)(4)(i) Consumer Consent 9(a)(4)(i)(A) General 1. General. 9(a)(4)(i)(B) Email Option Required 1. General. 9(a)(4)(ii) Subsequent Loss of Consent 1. General. 2. Loss of consent applies to all notices. Paragraph 9(a)(4)(ii)(A) 1. Revocation. Paragraph 9(a)(4)(ii)(B) 1. Notice. i. An email returned with a notification that the consumer's account is no longer active or does not exist. ii. A text message returned with a notification that the consumer's mobile telephone number is no longer in service. iii. A statement from the consumer that the consumer is unable to access or review disclosures through a particular electronic delivery method. 9(a)(5) Segregation Requirements for Notices 1. Segregated additional content. 9(a)(7) Model Forms 1. Safe harbor provided by use of model forms. 9(b) Payment Notice 9(b)(1)(i) First Payment Withdrawal 1. First payment withdrawal. 2. First payment withdrawal is determined when the loan is in covered status. 3. Intervening payments. 9(b)(1)(iii) Exceptions 1. Exception for initial payment transfer applies even if the transfer is unusual. 2. Multiple transfers in advance. 9(b)(2) First Payment Withdrawal Notice 9(b)(2)(i) Timing 1. When the lender obtains payment authorization. 9(b)(2)(i)(A) Mail 1. General. 9(b)(2)(i)(B) Electronic Delivery Paragraph 9(b)(2)(i)(B)(1) 1. General. Paragraph 9(b)(2)(i)(B)(2) 1. General. 2. Alternate Means. 9(b)(2)(ii) Content Requirements 9(b)(2)(ii)(B) Transfer Terms Paragraph 9(b)(2)(ii)(B)(1) Date 1. Date. Paragraph 9(b)(2)(ii)(B)(2) Amount 1. Amount. 2 Paragraph 9(b)(2)(ii)(B)(5) Payment Channel 1. General. 5 2. Illustrative examples. 9(b)(2)(ii)(C) Payment Breakdown 9(b)(2)(ii)(C)(2) Principal 1. General. 9(b)(2)(ii)(C)(4) Fees 1. General. 9(b)(2)(ii)(C)(5) Other Charges 1. General. 9(b)(3) Unusual Withdrawal Notice 9(b)(3)(i) Timing 1. General. 9(b)(3)(ii) Content Requirements 1. General. 9(b)(3)(ii)(C) Description of Unusual Withdrawal 1. General. 2. Illustrative example. 3. Varying amount. 1 i 1 ii 2 4 4. Date other than due date of regularly scheduled payment. 2 9(b)(4) Electronic Delivery 1. General. 9(b)(4)(ii) Electronic Short Notice 9(b)(4)(ii)(A) General Content 1. Identifying statement. 9(c) Consumer Rights Notice 9(c)(2) Timing 1. General. 9(c)(3) Content Requirements 1. Identifying statement. 2. Fees. 9(c)(4) Electronic Delivery 1. General. Section 1041.12—Compliance Program and Record Retention 12(a) Compliance Program 1. General. 12(b) Record Retention 1. General. 12(b)(4) Retention of Records Relating to Payment Practices for Covered Loans 1. Methods of retaining documentation. 12(b)(5) Electronic Records in Tabular Format Regarding Payment Practices for Covered Loans 1. Electronic records in tabular format. Section 1041.13—Prohibition Against Evasion 1. Lender action taken with the intent of evading the requirements of the rule. [82 FR 54871, Nov. 17, 2017, as amended at 84 FR 27929, June 17, 2019; 85 FR 44445, July 22, 2020]