Court delays CFPB payday rule as industry challenge continues (1)
Payday lenders have won a bid to delay a Consumer Financial Protection Bureau rule limiting their access to customers’ bank accounts to collect payments.
Payday lenders and auto titles are not required to comply with the CFPB rule while the Community Financial Services Association of America and a Texas-based trade group are appealing a district court ruling in favor of the bureau, the United States Court of Appeals for the Fifth Circuit. said on October 14 decision.
The CFPB rule requires payday and vehicle title lenders to obtain permission to access a consumer’s bank account after two unsuccessful attempts to collect on short-term, high-cost loans, among other provisions.
Judge Lee Yeakel of the U.S. District Court for the Western District of Texas in August began a 286-day transition period for the rule to take effect after rejecting the industry group’s challenge. The Fifth Circuit said in its unanimous order that the transition period will not begin until the appeals process is complete.
Judges Jerry E. Smith, Stephen A. Higginson and Don R. Willett signed the order.
The court order will allow payday lenders to continue doing business as the litigation progresses, ACSA said in a statement Friday.
“Without the extension of the Fifth Circuit’s suspension, our members would have been forced to spend significant time and resources bringing themselves into compliance before the Fifth Circuit had an opportunity to resolve our appeal,” said the industry group.
The CFPB declined to comment.
The CFPB had set June 13, 2022 as the effective date for the rule following Yeakel’s decision. The district court judge denied the industry’s motion to suspend regulation while trade groups appealed his decision to the Fifth Circuit.
The rule on appeal is a stripped down version of the regulations first published in October 2017 by former Obama-appointed director Richard Cordray.
The original rules provided strict requirements for lenders to determine a borrower’s ability to repay a payday loan or vehicle title loan, which can have interest rates of up to 400%. The CFPB also imposed cooling-off periods after a borrower took out three loans in a short period of time.
The Trump administration rolled back those provisions, but kept restrictions on payday lenders’ access to consumer bank accounts.
Consumer advocates hope President Biden’s CFPB director Rohit Chopra will reinstate repayment capacity provisions and cooling requirements.
Chopra was sworn into office on October 12.
The case is City. Fin. Serves. Ass’n. of Am., Ltd. vs. CFPB5th Cir., n° 21-50826, reprieve granted on 10/14/21.