What is one potential consequence of failing to meet Ability to Repay (ATR) requirements?

One potential consequence of failing to meet Ability to Repay (ATR) requirements is that the loan may be classified as high-cost and subject to additional regulations. The ATR rule, established under the Dodd-Frank Act, requires lenders to assess a borrower’s ability to repay a loan before extending credit. When a loan does not meet these standards, it can be considered high-cost, which typically means that it carries higher fees or interest rates and requires adherence to stricter regulatory guidelines to protect consumers. This additional scrutiny serves as a safeguard against predatory lending practices and aims to ensure that borrowers are not set up for failure due to unaffordable loan terms.

In contrast, the other options do not directly relate to the consequences of failing ATR requirements. Lower interest rates, extended repayment terms, or qualification for subprime loans do not necessarily follow from ATR non-compliance and do not contribute to the protections meant to be enforced by the ATR rules.