Federal Court Upholds Payment Provisions of CFPB’s 2017 Payday Loan Rule | PC Weiner Brodsky Kider

The U.S. District Court for the Western District of Texas recently upheld the payment provisions of the CFPB’s 2017 rule on payday, vehicle title, and certain high-cost installment loans.

The decision upheld the CFPB’s ban on certain payment practices by covered lenders that the CFPB deemed “unfair, deceptive or abusive.” The payment provisions prohibit lenders from continuing to attempt to withdraw a payment from the borrower’s account after two unsuccessful attempts, without obtaining further authorization. The payment provisions also set limits on any new authorization obtained after two unsuccessful withdrawal attempts. WBK covered CFPB’s notice of proposed rulemaking here.

The lawsuit was brought by two trade associations on behalf of certain payday lenders and other affected businesses, which challenged, among other things, the structure of the CFPB as unconstitutional, and the CFPB’s ratification of the payment provisions and the regulatory petition as arbitrary and capricious under the Administrative Procedure Law. In response to arguments from trade associations, the district court found no constitutional issues with the structure of the CFPB. The District Court further found that the payment arrangements are within the statutory authority of the CFPB and are not arbitrary or capricious. Finally, the district court found that the CFPB performed a proper cost-benefit analysis and observed the procedures required to enact the payment provisions.

Although the CFPB’s original compliance date for the rule has passed, the district court granted the trade associations’ request for an extension of the suspension of the compliance date, which the district court had set aside. implemented on November 6, 2018. Compliance with the rule will become mandatory on June 13, 2022.

The deal is Community Financial Services Association of America, Ltd., c. Consumer Financial Protection BureauNo. 1:18-cv-295-LY.

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