Texas Federal Court Refuses to Reconsider Denied Stay of Payday Rule Compliance Date, CFPB Hints at Further Rulemaking

On August 7, 2018, a Texas federal court denied two payday lending trade groups’ motion for reconsideration of the court’s earlier order, which granted a stay of their lawsuit against the CFPB challenging the Payday Rule, but denied a stay of the Payday Rule’s compliance date.  In a joint status report filed with the court, the CFPB evinced an intention to engage in rulemaking to reconsider the Payday Rule by “early 2019.”

The Payday Rule, which lenders must comply with by August 19, 2019, concerns the underwriting of certain personal loans with short term or balloon-payment structures, as well as lenders’ payment withdrawal practices for those loans and certain additional installment loan products.  In its executive summary of the rule, the CFPB states that the rule requires lenders to “choose between two ability-to-repay underwriting methodologies” and “report and obtain information about a consumer’s financial obligations and borrowing history from certain consumer reporting agencies that are required to register with the Bureau.”  The lending trade groups filed this suit, alleging that the CFPB rule was “arbitrary, capricious, and unsupported by substantial evidence,” and therefore violated the Administrative Procedure Act.

Approximately a week after the court denied the trade groups’ motion for reconsideration, the CFPB filed a joint status report with the court which explained that the CFPB “is engaged in ongoing work to prepare a notice of proposed rulemaking to reconsider the Payday Rule and expects to issue that notice of proposed rulemaking by early 2019.”  Nothing is said in the report as to whether the CFPB intends to delay the Payday Rule’s compliance date in order to engage in said rulemaking.

The executive summary of the rule is accessible here.  The case is Community Financial Services Association of America, Ltd., et al. v. Consumer Financial Protection Bureau, No. 1:18-cv-295, Western District of Texas.