Banking and Finance Law Daily Payday Rule lawsuit status remains unchanged
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Friday, May 31, 2019

Payday Rule lawsuit status remains unchanged

By Colleen M. Svelnis, J.D.

The CFPB and Community Financial Services Association have filed a joint status report on their ongoing lawsuit involving the Payday Rule, with the court keeping in effect both the stay of the compliance date, as well as the stay in litigation.

A federal court for the Western District of Texas has ordered a stay of litigation and a stay of the Aug. 19, 2019, compliance date to remain in effect, after reviewing a joint status report filed by the parties in an ongoing lawsuit over the Bureau’s Payday, Vehicle Title, and Certain High-Cost Installment Loans rule. The next status report is due by Aug. 2, 2019. Community Financial Services Association of America and Consumer Service Alliance of Texas filed the lawsuit seeking to invalidate the Bureau’s final rule, which was suspended to allow the Bureau to conduct a rulemaking process reconsidering the rule.

The court had previously ordered the stay of the payday lending rule’s compliance date of Aug. 19, 2019, given that the Bureau planned to issue Notices of Proposed Rulemaking revisiting the rule’s ability-to-repay provisions, calling it "appropriate" in order "to prevent irreparable injury" (see Banking and Finance Law Daily, Nov. 9, 2019). The CFPB has put forth two notices of proposed rulemaking: one that proposes to rescind the underwriting provisions, and one that proposes to delay the compliance date for those provisions until Nov. 19, 2020.

According to the joint status report of both parties, the comment periods for the Bureau’s proposals closed on May 15, 2019, and March 18, 2019, respectively. The Bureau indicated in the status report its continued progress on both rulemakings but has not yet issued final rules for either.

Payday Rule complications. The CFPB payday lending rule was issued on Jan. 16, 2018, but most provisions do not require compliance until Aug. 19, 2019. The final 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 October 2018, the Bureau indicated that it planned to revisit the ability-to-repay provisions and not the payments provisions, in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions.

Attorneys: Christian G. Vergonis (Jones Day) for Community Financial Services Association of America, Ltd. and Consumer Service Alliance of Texas. Kevin Edward Friedl for Consumer Financial Protection Bureau.

Companies: Community Financial Services Association of America; Consumer Service Alliance of Texas

MainStory: TopStory BankingFinance CFPB ConsumerCredit FedTracker Loans TexasNews

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