CFPB Beats Suit Challenging Payday Lending Regs

A Texas federal judge has rejected a payday loan-industry-backed challenge to the CFPB's remaining payday lending regulations, clearing the way for them to take effect next year after a years-long stay. The U.S. District Court for the Western District of Texas has awarded the CFPB summary judgment in the case.

In May 2018, the Texas federal district court hearing the lawsuit filed by two trade groups (Community Financial Services Association of America and the Consumer Service Alliance of Texas) challenging the 2017 Rule entered an order staying the lawsuit. Subsequently, in November 2018, the court entered an order staying the August 19, 2019 compliance date for both the 2017 Rule’s ability-to-repay provisions and its payment provisions. 

Following the CFPB’s rescission of the 2017 Rule’s ability to repay provisions in July 2020, the parties jointly moved to lift the stay of the litigation. The court entered an order in August 2020 lifting the stay and the parties thereafter filed cross-motions for summary judgment. Briefing on the cross-motions concluded in December 2020. The Court's action last week upheld the Payment Provisions in the CFPB’s 2017 rule on payday, vehicle title, and certain high-cost installment loans.

Noted CFPB Acting Director Dave Uejio: “I am pleased the court reaffirmed our ability to protect borrowers from unfair and abusive payment practices in the payday lending and other markets covered by the rule. These provisions will prohibit lenders from continuing to attempt to withdraw payment from borrowers’ accounts after two attempts have failed, which will protect borrowers from being hit with multiple fees for returned payments or insufficient funds and reduce the risk that consumers’ accounts will be closed.

“Today’s ruling will provide relief to all those who could face these practices. Under the court’s order, compliance with the rule will become mandatory on June 13, 2022. The CFPB expects lenders to follow the requirements of the payment provisions, consistent with the court’s order.”

The trade groups challenging the CFPB previously suggested they would appeal if the court ruled in favor of the Bureau.

Source: CFPB