The United States District Court for the Western District of Texas recently upheld the payment provisions of the 2017 CFPB rule on salary, vehicle title, and certain high-cost installment loans.
The ruling confirmed the CFPB’s ban on certain payment practices by covered lenders that the CFPB deemed “unfair, misleading or abusive”. The payment provisions prohibit lenders from continuing to attempt to withdraw payment from borrowers’ accounts after two failed attempts without obtaining re-authorization. The Payment Provisions also set limits on any new authorization obtained after two unsuccessful withdrawal attempts. WBK has covered the CFPB opinion of the regulatory proposal here.
The lawsuit was brought by two trade associations on behalf of some payday lenders and other relevant companies, which have challenged, among other things, the structure of the CFPB as unconstitutional, and the CFPB’s ratification of the payment provisions. and the regulatory petition as arbitrary and capricious under the Law on Administrative Procedure. In response to the arguments of the professional associations, the district court found no constitutional problem with the structure of the CFPB. The district court further found that the payment arrangements are in accordance with the statutory authority of the CFPB and are not arbitrary or capricious. Finally, the district court found that the CFPB had carried out an appropriate cost-benefit analysis and observed the procedures required to promulgate the payment provisions.
Although the CFPB’s initial compliance date with the rule has passed, the district court granted the professional associations’ request for an extension of the suspension of the compliance date, which the district court implemented on November 6. 2018. Compliance with the rule will become mandatory on June 13, 2022.
The case is Community Financial Services Association of America, Ltd., v. Consumer Financial Protection Bureau, No.1: 18-cv-295-LY.