The Consumer Financial Protection Bureau on Thursday evening released a final rule to delay the date of compliance with the mandatory underwriting provisions of the 2017 payday loan rule.
This decision, which was expected, delays the date of compliance of these provisions by 15 months, until November 19, 2020.
In February, CFPB director Kathy Kraninger proposed to roll back the strict underwriting requirements initially finalized under her predecessor, Richard Cordray, in 2017. This was necessary before separately delaying the compliance date, which was the agency’s decision this week.
Some suggest the latest delay is part of CFPB’s strategy to strengthen its legal position if it is sued by consumer advocates for violating the Administrative Procedure Act, which prohibits agencies from issuing “arbitrary rules.” , capricious and unsupported by substantial evidence ”. The agency is in the unusual position of trying to overturn its own rule and must provide proof that its original regulations were flawed.
“They know they are going to be sued by consumer advocates and state attorneys general, so they believe this is the best procedural way to exercise their role so that he resists legal attack,” said Alan Kaplinsky, partner at Ballard Spahr.
This delay gives the CFPB more time to finalize its repeal of the compulsory underwriting provisions for small loans. According to the original proposal, the plan would have required lenders to assess the borrower’s repayment capacity before granting a short-term loan, and would have limited the number of payday loans. Lenders have long opposed this, saying the repayment capacity provisions threaten their business model.
Although the CFPB proposed to waive these underwriting requirements, the agency leaves intact a second element of the 2017 Final Rule which sought to limit the frequency with which a lender could attempt to debit payments from a bank account. borrower.
Payment arrangements were originally scheduled to go into effect on August 19. But a federal judge in March effectively suspended the compliance date while the rule is debated in court.
Many payday lenders ultimately expect the final rule that comes into effect to be much narrower than what was originally finalized under Cordray.
“When the dust settles – putting aside what might happen in court – I think their hope and expectation is that the only thing that kicks in is the payment provision and there will be no requirement. subscription, ”Kaplinsky said.
The office also said it was making “certain corrections to correct several clerical and non-substantial errors” that it identified in the 2017 pay rule.
