Challenges to Payday Rule’s Ability to Repay Denied Provisions | Troutman pepper


On January 14, a DC federal judge granted the Consumer Financial Protection Bureau’s (CFPB) motion to dismiss a case filed by the National Association for Latino Community Asset Builders (NALCAB), after the NALCAB challenged the CFPB’s decision. repeal repayment capacity requirements. .

The Paydays Rule has been both amended and challenged since its inception in 2017. In July 2020, the CFPB rescinded the ability to reimburse provisions of the Paydays Rule, which contained provisions requiring lenders to verify borrowers’ ability to repay their loans without additional borrowing, as well as provisions for vehicle title lending and other forms of short-term, high-cost credit. The original rule also set restrictions on lenders’ practices for collecting payments from borrowers’ bank accounts.

NALCAB filed the immediate lawsuit in October 2020, alleging that the CFPB violated federal regulatory standards by changing its 2017 payday rule. The lawsuit asked the court to overturn the repeal and order the CFPB to implement the full and original 2017 pay rule.

NALCAB argued that the repeal of the repayment capacity provisions increased the need for its services and thereby reduced the effectiveness of NALCAB’s other efforts. NALCAB also argued that it needs to devote more time to training organizations that help consumers get out of the reborrowing cycles associated with payday loans. NALCAB has claimed association status on behalf of one of its member organizations.

The judge ruled that the NALCAB had not established “concrete and demonstrable harm to its business” regarding the repeal of the original paydays rule. The judge said: “The jurisprudence of this Circuit makes it clear that there must be a distinct discernible impairment to the organization’s ability to provide services – something that makes it more difficult for the organization to carry on its business. NALCAB has not plausibly alleged such a deficiency. The judge denied the status of association for the same reasoning and that the association had not demonstrated prejudice.

Our catch. This is one of the challenges the CFPB has faced with its payday rule. As noted in our blog post, the Fifth Circuit has issued a stay, extending the June 2022 compliance date for the troubleshooting rule until a final judgment is rendered.


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