Beyond SDLR Compliance: New Borrower Engagement Features

CFPB Enforcement Update: What It Means for Your Business

The regulatory landscape for consumer lending continues to evolve. While the Small Dollar Lending Rule (SDLR) officially went into effect on March 30, 2025, the CFPB recently announced it “will not prioritize enforcement or supervision” of the rule’s payment provisions. This significant development adds another layer to the already complex regulatory environment.

Who Is Covered Under the SDLR?

The Small Dollar Lending Rule applies to lenders that provide:

• Short-term consumer loans with terms of 45 days or less
• Longer-term balloon-payment loans (where one payment is at least twice as large as any other payment)
• Longer-term loans with APRs over 36% that utilize account access for payments

These rules primarily affect payday lenders, vehicle title lenders, and providers of certain high-cost installment loans.

For executive decision-makers at covered lending institutions, this creates both opportunities and strategic considerations:

1. Reduced immediate enforcement risk – The CFPB’s focus has shifted to other priorities, particularly services to military personnel and veterans
2. The rule remains technically in effect – Despite non-enforcement, the rule’s requirements haven’t been rescinded
3. Future enforcement remains possible – The CFPB indicated it may narrow the scope rather than eliminate the rule entirely
4. State-level enforcement could increase – As federal oversight shifts, state regulators may fill the enforcement gap

These dynamics make a flexible, technology-driven approach to compliance particularly valuable in today’s environment.

Building on Our SDLR Compliance Foundation

As we detailed in our previous blog post, Payliance recently launched comprehensive SDLR compliance reporting tools designed to address the core challenges of the “two-payment rule.” These tools automatically identify and track consecutive failed payment attempts, giving you immediate visibility into accounts that require attention.

Our automated reporting system includes:

• Separate reports for ACH and Card platforms showing consecutive NSF returns
• Continuous updates with a rolling 3-month history
• Intelligent tracking that only flags truly consecutive failures
• Seamless integration through the Payliance Merchant Portal

These foundational tools eliminate the operational inefficiency, human error risk, and compliance exposure that would otherwise come with manual monitoring of consecutive payment failures.

SDLR Compliance: From Requirement to Strategic Advantage

Beyond mere compliance, the systems you implement today can deliver measurable operational advantages. Our automated SDLR compliance reporting tools already provide:

• Reduced operational costs – Eliminate manual monitoring processes that drain staff resources
• Lower compliance risk – Systematic tracking provides consistent documentation for any future audit needs
• Improved portfolio visibility – Gain insights into payment failure patterns across your customer base
• Better collection outcomes – Identify issues early to improve overall repayment success

For busy executives focused on operational efficiency and financial performance, these existing tools deliver immediate value regardless of the current enforcement environment.

Coming Soon: Features to Transform Borrower Engagement

Building on our existing SDLR compliance platform, we’re excited to announce two powerful new features designed to further enhance your operational efficiency and borrower relationships:

1. Instant Borrower Notifications

What it does: It automates timely text notifications to keep borrowers informed about payment status, due dates, and account activity.

Executive Value:

• Reduced operational costs – Eliminates staff time spent on manual communications
• Improved cash flow – Timely payment reminders help increase on-time payments
• Lower customer service burden – Proactive communication reduces inbound call volume for payment questions
• Decreased dispute resolution costs – Clear payment communication reduces costly disputes

2. Seamless Authorization Requests

What it does: When you need a new authorization after failed payment attempts, our secure text delivery system makes it easy for borrowers to provide consent with minimal friction.

Executive Value:

• Recovered revenue – Convert previously uncollectible accounts by streamlining the re-authorization process
• Faster cash conversion – Reduce the timeline between failed payments and successful collection
• Lower acquisition costs – Retain more borrowers by making the re-authorization process frictionless
• Reduced compliance overhead – Automatically document and store all customer authorizations

The Bottom Line: Business Value Regardless of Regulatory Shifts

While regulatory requirements may evolve, the business value of these tools remains constant. Lenders implementing these solutions can experience:

• Reduction in overall payment failure rates
• Decrease in staff time allocated to compliance monitoring
• Improvement in recovery rates on previously failed payments
• Mitigation of regulatory and litigation risk exposure

Take Action Now

To learn more about our new SDLR Reporting, notification, and authorization request capabilities, see the Solution Brief here. To schedule a consultation, contact Payliance today. These tools are for informational purposes only. Please consult with your legal counsel regarding compliance requirements