Alert: District Judge Sides With CFPB, Maintains Payday Rule Payment Arrangements | Cooley LLP


On August 31, 2021, a Texas federal district court judge granted summary judgment to the Consumer Financial Protection Bureau in a lawsuit brought by two industry trade associations, ultimately upholding CFPB’s “payment arrangements” Payday rule, vehicle title rule, and some high cost installment loans (CFPB Payday Rule) first published in November 2017.

As explained in a previous customer alert Spanning the three-year history of the lawsuit, business groups have sought to prevent the implementation of the payment provisions of the CFPB’s payday rule. The groups argued that such provisions were illegal because the ratification of the CFPB payday rule by the CFPB director was inadequate and the provisions fell outside the legal authority of the CFPB. The judge dismissed all challenges from the professional associations, noting that the payment arrangements were not void ab initio and that a constitutionally appointed director duly ratified the provisions. The court also rejected the associations’ argument that the CFPB had wrongly determined that the payment practices covered by the provisions were unfair and / or abusive. The tribunal agreed that the CFPB should only consider the material aspects of the problem for its cost-benefit analysis of the provisions to be accepted.

Further, the court rejected the associations’ argument that the CFPB unreasonably rejected a request for regulation to exclude debit card payments from payment arrangements, concluding that the CFPB only needed a basis rational to reject such an exception. Finally, the court rejected the associations’ attempt to argue that the structure of the CFPB was otherwise unconstitutional under the appropriations clause.

The judge rejected the CFPB’s request to lift the suspension of compliance within 30 days of the entry of the judgment and granted the lenders an extended compliance period of “286 days after the final judgment” or June 2022, giving lenders more time to prepare for the CFPB. Implementation of the troubleshooting rule.

In light of these developments, lenders are expected to start familiarizing themselves with the payment provisions of the CFPB Payday Rule to prepare for compliance by June 2022.

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