Alert: CFPB files motion to lift suspension of payment provisions in 2017 payday rule | Cooley LLP
The Consumer Financial Protection Bureau (CFPB) recently filed a motion to lift the suspension of the compliance date for the “payment arrangements” in the Payday rule, vehicle title rule, and some high cost installment loans (CFPB Payday Rule) first published in November 2017. The CFPB Payday Rule contains two main types of provisions: provisions relating to repayment capacity and provisions relating to payment.
The payment provisions prevent lenders from attempting to withdraw funds from a client’s account without the client’s consent after two consecutive unsuccessful withdrawal attempts. They also require lenders to provide written notice to a customer before making the first attempt to withdraw payments from the account, and before other attempts involving different payment dates, amounts, or channels.
The CFPB payday rule has a contentious history. In April 2018, two business groups filed a complaint against the rule. In the relevant part, they argued that the CFPB payday rule was invalid because the CFPB was unconstitutionally structured when it enacted the CFPB payday rule, since the president could not revoke the sole administrator of the CFPB only for a valid reason. In June 2018, a Texas Federal District Court ordered a stay of the lawsuit. In November 2018, the court issued an order suspending the compliance date for the entire CFPB payday rule, given the CFPB’s plan to revise certain aspects of it in formal regulations.
In June 2020, the United States Supreme Court ruled Seila Law LLC v. Consumer Financial Protection Bureau, 140 S. Ct. 2183 (2020), ruling that the CFPB’s single director structure violated the separation of powers and invalidating the legal restriction on the president’s power to dismiss the director. After the decision in Seila Law LLC, the CFPB issued a notice on July 7, 2020, announcing that the director of the CFPB had confirmed and ratified the payment provisions of the CFPB Payday Rule. On the same day, the CFPB issued a final rule, which repealed the repayment capacity provisions of the CFPB payday rule, but left the payment provisions intact.
After the publication of the final rule, the two parties jointly requested the lifting of the stay of the lawsuit challenging the CFPB payday rule. The court issued an order in August 2020 lifting the stay of the litigation. Both parties subsequently applied for summary judgment. In July 2021, professional groups filed a Notice of potentially relevant appeal proceedings in which they informed the tribunal of “potentially relevant” cases before the United States Court of Appeals for the Fifth Circuit which raise the question of the appropriate remedy for acts taken by an agency “where its director was unconstitutionally in office. shelter from dismissal by the president. “The notice suggested that the court postpone its decision on the parties’ summary judgment motions, but did not specifically request that the court do so.
The CFPB motion
In its recent petition, the CFPB states that the opinion of professional groups does not justify postponing the court’s decision on counterclaims for summary judgment, in particular because professional groups do not have “a substantial file on the merits. Of their assertion that the [Rule] was promulgated by a [CFPB] director who was unconstitutionally immune from dismissal by the president. The CFPB affirms that although Seila Law LLC the Supreme Court declared invalid the statutory restriction on the president’s ability to dismiss the director of the CFPB, this decision not invalidating the payment provisions because “a director fully accountable to the president” has already ratified them. The CFPB is asking that even if the court defers its decision on payment arrangements until the Fifth Circuit cases are resolved, the court should lift the suspension of the compliance date for payment arrangements in the meantime. In support of this request, the CFPB argues that, while the payment provisions “place only modest demands on lenders”, complainants have had more than a year to prepare to comply since. the ratification of the provisions by the director. The CFPB further maintains that a prolonged stay “would harm the [CFPB’s] and the public interest ”that the payment arrangements come into effect.
Under the Biden administration, the CFPB resumed a more active role in the enforcement of consumer protection. The motion signals the CFPB’s desire for a resolution of the lawsuit and the desire to move forward with the implementation of the payment arrangements.