Litigation Leaves CFPB’s Payday Rule in Limbo

Source: American Banker (Subscription may be required.)

For the past five years, the payday lending industry has successfully fought off federal regulations of short-term, small-dollar loans by suing the Consumer Financial Protection Bureau. 

The years-long litigation over the CFPB’s payday rule may finally be coming to a head, but the fact that the industry has been able to stall the rule for so long has infuriated consumer advocates. 

“They are trying to defeat the rule if they can but if nothing else, they have slowed it down and gummed it up," said Chris Peterson, a law professor at the University of Utah and former advisor to former CFPB Director Richard Cordray. "It shows that any series of initiatives to just fix problems can get undone and undermined."

The U.S. Court of Appeals for the Fifth Circuit is expected to rule In the next three to six months on whether the payday rule — first developed under Obama appointee Cordray but finalized in 2020 by Trump appointee Kathy Kraninger — can go into effect. 

Two payday trade groups that sued the CFPB in 2018 are claiming that the payday rule should be struck down entirely because former President Donald Trump would have fired Cordray if he had been given the chance. Cordray, an Obama appointee, finalized the first payday rule in 2017.