Report: Shutdown kept CFPB payday lending rule revisions from meeting January release

A much-anticipated revision of rules slated to take effect in August regulating payday lending is another victim of the recent partial government shutdown, according to a report Sunday.

The New York Post reported that the delay in the payday lending revisions – which the Consumer Financial Protection Bureau (CFPB) had previously (and repeatedly) said would be issued in January – is due to staffing issues in a division of the White House Office of Management and Budget (OMB).

According to the Post, staffing at the OMB’s Office of Information and Regulatory Analysis (OIRA) – which (among other things) reviews drafts of proposed and final regulations under a variety of statutory and Executive Order authorities – was affected by the shutdown. The staff was “whittled down” to doing essential work during the 35-day shutdown, which ended Jan. 25, according to the Post.

Unless Congress and the White House can agree on a funding plan by Feb. 15 (or unless Congress can override a presidential veto), another shutdown may be ahead – including further delay on work for the revised rule.

The payday lending rule, which was adopted by CFPB in the final weeks of Richard Cordray’s tenure as director in October 2017 (and is known formally as the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule), has been the subject of considerable legal wrangling and promises of a revised approach.

The 1,690-page-long regulation requires lenders to conduct a “full-payment test” (also known as the “ability-to-repay” provisions) to determine upfront that borrowers can afford to repay their loans without re-borrowing. The “full-payment test” also requires lenders to verify the consumer’s income if evidence is reasonably available and to pull a credit report to verify financial obligations. For certain short-term loans, the rule allows lenders to skip the full-payment test if they offer a “principal-payoff option” that allows borrowers to pay off the debt more gradually. The rule also by caps at three the number of short-term loans that lenders can make in quick succession.

The overall rule took effect in January 2018, but most parts of the rule are not effective until August of this year. In January of last year, Cordray’s replacement at the agency – Acting Director John (“Mick”) Mulvaney – said the agency would “reconsider” the rule later in the year. In the meantime, CFPB joined a lawsuit brought by two Texas-based payday lending companies challenging the rule and asking that the effective date be suspended.

But a federal court in Austin last June rejected the challenge and kept the effective date in place. But that changed later in the year. Last November – following an October announcement by the agency that proposed rules that will “reconsider” its rules regarding payday lending are expected to be issued in January – the same court ruled that “to prevent irreparable injury a stay of the Rule’s current compliance date of August 19, 2019, is appropriate.”

In any event, in its October announcement, CFPB said it only plans to propose revisiting 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.”

NY Post – Payday lenders held back by shutdown: sources