The CFPB has published its highly anticipated final rule repealing the repayment capacity provisions in its Payday Loans/Auto Title/High Installment Loan (Payday Rule) Final Rule. The final rule will become effective 90 days after it is posted in the Federal Register.
The CFPB too issued a document in which he affirmed and ratified the payment provisions of the payday rule. The document indicates that the ratification dates back to November 17, 2017, when the rule on paydays was published in the Federal Register. The ratification aims to preserve the validity of the payments provisions in response to the US Supreme Court’s decision last week in Seila Law who ruled that the Dodd-Frank provision that only allows the president to remove the CFPB director “for cause” violates the separation of powers in the U.S. Constitution.
The payment provision compliance date was stayed pursuant to an order by the Texas federal district court that heard the lawsuit filed against the CFPB challenging the payday rule. The Office indicates in his press release that he “will seek to have [the payments provisions] enter into force with a reasonable period of time for entities to come into compliance. (The CFPB also published a separate document today in which he claimed to ratify most of the regulatory actions the Bureau took from January 4, 2012, to June 30, 2020. We’ll discuss that ratification in a separate blog post.)
In its press release, the CFPB announced that it had rejected the petition it had received to begin regulation to exclude debit and prepaid cards from the payments provisions. We are disappointed that the Bureau has decided not to address this issue as well as other serious deficiencies in the payments provisions that we have highlighted in previous blogs and in letters to the CFPB.
The Bureau also announced that it has issued guidance to clarify the scope of the payments provisions and help lenders comply with the provisions. Additionally, it announced its intention to conduct research on the development of potential disclosures to provide consumers with information to better understand certain features of payday loans.
There could be an effort to overturn the final rule under the Congressional Review Act and the Bureau is likely to face a lawsuit challenging the final rule under the Administrative Procedure Act.
We are currently reviewing the final rule and guidance and will provide our thoughts in future blogs.