Payday lending effective date stayed (for now) in light of bureau plan to ‘reconsider’ rule

The payday lending rule’s effective date of Aug. 19, 2019, has been stayed by a federal court in light of a decision by the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB) to “reconsider” its rule by early next year.

U.S. District Court Judge Lee Yeakel ruled Tuesday that “to prevent irreparable injury a stay of the Rule’s current compliance date of August 19, 2019, is appropriate.” However, the judge (ruling from the federal court for the Western District of Texas, Austin Division) declined the request of the BCFP and bureau Acting Director John (“Mick”) Mulvaney to stay the August 2019 compliance date until 455 days “from the date of final judgment in this action.”

Yeakel also continued a stay on litigation over the rule (formally known as the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule), which he ordered last summer. “As the Bureau has publicly announced it plans to revisit portions of the Rule, including the compliance date, the court will adjust the conditions and timing for the parties to file periodic joint status reports,” Yeakel wrote.

On Oct. 26, the BCFP stated (in a blog post; no other official statements have been released by the agency) that proposed rules that will “reconsider” its rules regarding payday lending are expected to be issued in January. The bureau said then that it would 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.”

Yeakel has been presiding over action since late last spring over the payday lending rule, including a joint May 31 motion by the bureau and two payday lenders’ groups that had sued the bureau to prevent enforcement of the rule. The two groups are the Community Financial Services Association of America, Ltd., and Consumer Service Alliance of Texas, groups that describe themselves in court filings 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, last spring, the bureau reiterated its intent to initiate a rulemaking to reconsider the Payday Rule and informed OMB that it expects to issue a notice of proposed rulemaking for this purpose by February 2019.

Four consumer groups subsequently challenged the payday lenders’ groups efforts  to delay the compliance date of the rule.

Yeakel, in June, sided with the consumer groups and ruled not to delay the effective date of the rule. He later (in August) reiterated that decision when the bureau and the payday lenders asked him to reconsider. Now, Yeakel has agreed to a stay of the effective date.

In his ruling, Yeakel pointed to a status report filed by Mulvaney and the bureau (also on Oct. 26), noting that “the Bureau informs the court that it intends to issue notices of proposed rulemaking in January 2019 to reconsider the Rule and address the Rule’s August 19, 2019 compliance date.” That was apparently good enough for Yeakel to stay the effective date.

“Having considered the parties’ October 26 joint status report, particularly the information that the Bureau has publicly announced it plans to reconsider portions of the Rule and address the Rule’s compliance date and the case file, the court reconsiders the portion of the June 12, 2018 order denying the request to stay the Rule’s compliance date of August 19, 2019,” Yeakel wrote.

He also ordered the bureau to report back to him, no later than March 1, 2019, “about proceedings related to the Rule and this litigation …”

USDC payday lending date stay

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