Payday lending rules will be ‘reconsidered’ in January with new proposal, bureau states

Proposed rules that will “reconsider” its rules regarding payday lending are expected to be issued in January, the federal consumer financial protection agency said Friday.

In a statement, the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB) said it will make final decisions regarding the proposal’s scope closer to its issuance.

However, the agency said, it only plans to propose revisiting only the “ability-to-repay provisions” and not the payments provisions. The bureau statement said it was making that distinction “in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions.”

The bureau’s 2017 payday rule – titled the Payday, Vehicle Title, and Certain High-Cost Installment Loans and set to take effect Aug. 19, 2019 – has been the focus of both legal and administrative contention.

In June, a federal court in Texas denied a request by bureau Acting Director John (“Mick”) Mulvaney and two payday lender advocacy groups to delay the effective date. The court had received motions filed by four consumer groups challenging the payday lenders’ groups efforts (with the agency’s support) to delay the compliance date of the rule.

The advocacy groups were responding to a joint May 31 motion by the bureau and two payday lenders’ groups (the Community Financial Services Association of America, Ltd., and Consumer Service Alliance of Texas) that had sued the bureau to prevent enforcement of the rule. In court filings, the groups described themselves as trade associations with members who are engaged “in the business of offering or facilitating payday loans and similar consumer financial products.”

The joint motion by the bureau and the two payday lender groups asked that the court stay the lawsuit brought by the payday lenders and stay the rule’s compliance date until 445 days after final judgment in the litigation. The groups have argued that, this spring, the bureau reiterated its intent to initiate a rulemaking to reconsider the Payday Rule and informed the Office of Management and Budget (OMB) that it expects to issue a notice of proposed rulemaking for this purpose by February 2019.

In July, the Treasury Department released a report that, among other things, recommended that BCFP rescind its payday rule. The report noted, however, that regulators should take steps to encourage sustainable and responsible short-term, small-dollar installment lending by banks. “Specifically, Treasury recommends that the FDIC reconsider its guidance on direct deposit advance services and issue new guidance similar to the OCC’s (Office of the Comptroller of the Currency) core lending principles for short-term, small-dollar installment lending,” the report says. That guidance was issued in May.

BCFP Public Statement Regarding Payday Rule Reconsideration and Delay of Compliance Date