The Consumer Financial Protection Bureau has filed a joint request in a lawsuit seeking to invalidate the Bureau’s Payday Lending Rule, asking that a federal judge suspend the lawsuit while the Bureau conducts a rulemaking process reconsidering the rule. The lawsuit, filed by the Community Financial Services Association of America (CFSA) against the CFPB, seeks to invalidate the Bureau’s final rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans. CFSA alleges that these short-term, small-dollar loans result in improved financial conditions for consumers and eliminating them will harm the very consumers the CFPB is supposed to protect (see Banking and Finance Law Daily, April 10, 2018). In addition to a suspension of the lawsuit, the joint motion of the CFPB, its Acting Director Mick Mulvaney, the CFSA, and the Consumer Service Alliance of Texas, asked the court for a stay of the compliance date set forth in the Payday Rule until 445 days after final judgment in the litigation; and a waiver of the Bureau’s obligation to file an answer in the case against it.
CFPB reconsidering payday lending rule. The CFPB payday lending rule established restrictions on short-term loans, including a test to ensure that consumers can afford payments, a limit on the number of loans that may be made in close succession, and a limit on the ability of lenders to continue debiting consumer accounts for payments after two consecutive failures (see Banking and Finance Law Daily, Oct. 5, 2017).
In the motion, the CFPB stated that, although the Payday Rule became effective on Jan. 16, 2018, the majority of its substantive provisions have a compliance date of Aug. 19, 2019. Furthermore, the Bureau pointed out that it had announced in January 2018 that it "intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule." According to the Bureau’s motion, the rulemaking process may result in repeal or revision of the Payday Rule and "thereby moot or otherwise resolve this litigation or require amendments to Plaintiffs’ complaint." In addition, the Bureau noted that it has granted a waiver from the April 16, 2018, deadline to all companies that have requested one, since their efforts to comply with the deadline could cause companies to engage in "unnecessary or premature work."
Consumer advocacy groups outraged. In response to the filing, Consumer Federation of America Financial Services Director Christopher Peterson stated that "The Trump Administration is siding with payday lenders in seeking an indefinite delay for already long-overdue safeguards on predatory triple-digit interest rate loans. This is a profound disappointment for anyone who cares about the welfare of struggling consumers." Peterson called it "a sad day for those that hoped for a federal agency focused on protecting the public from special interests."
Jose Alcoff, Payday Campaign Manager, Americans for Financial Reform, also responded with a statement that Mulvaney "has been doing the bidding of payday lenders for years, but putting the CFPB’s weight behind a joint legal motion with their lobbyists is a new low, even for him. Mulvaney is now openly making common cause with payday lenders to gut the CFPB’s common-sense protections for borrowers after years of study, analysis, and public comment. If granted, this motion would not simply push back compliance deadlines, but manufacture a delay so that Mulvaney can kill the rule entirely."
Allied Progress noted that it could be years before implementation of the payday lending rule. "The fix is in," stated Karl Frisch, the advocacy group’s Executive Director. "Mulvaney’s CFPB has joined forces with a payday lending trade group that has actively deceived the bureau in an effort to keep its predatory racket humming along. They have essentially asked the court to delay the bureau’s new protections for payday loan customers indefinitely."
Companies: Allied Progress; Americans for Financial Reform; Community Financial Services Association of America; Consumer Federation of America; Consumer Service Alliance of Texas
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