Following hearings this past spring, Representative Maxine Waters (D-CA), Chair of the House Financial Services Committee, released a statement that the Committee finds more work is needed to improve diversity at megabanks.  The statement, released on August 13, included data gathered from eight of the nation’s largest banks in response to letters to those institutions from Chairwoman Waters and Representative Joyce Beatty (D-OH).

The Committee concluded that senior leadership among large U.S. banks still is mostly white and male, with no megabank having a female or minority CEO.  The statement questioned whether diversity is really a priority for megabanks given that no chief diversity officer reports directly to the CEO.  And it noted that boards of the largest banks are 29% female and 17% minority, falling below the overall levels among the U.S. population of 50% female and 40% minority.

The Committee also examined supplier diversity and similarly found a lack of meaningful progress.  With average spend on diverse suppliers of $1.4 billion, less than 1% of megabank spending is devoted to diverse asset managers and suppliers, and only 4% of externally managed assets go to diverse-owned firms.

From a policy perspective, the Committee reported that only 1 out of 25,000 employees on average is dedicated to diversity; diversity metrics are not tied to compensation; and only half of megabanks tie it to performance.

As a result of these findings, the Committee’s overall conclusion was that megabanks are making some progress in diversity but much more is needed.  Specific recommendations include an increased focus on recruiting through affinity groups and minority institutions of higher education; closing the pay equity gap; and increasing investment in leadership and development programs to build a diverse talent pipeline.

Ballard Spahr’s Diversity & Inclusion Legal Team advises clients on the design and implementation of diversity and inclusion programs and is counseling regulated entities on developing and implementing diversity programs.  The team consists of Ballard Spahr lawyers from several practice groups who regularly advise financial institutions and publicly traded companies on regulatory compliance issues, including those under consumer financial services laws.

The firm’s weekly podcast includes an episode in which we review the four key focus areas of the 2015 diversity and inclusion standards adopted by the Offices of Minority and Women Inclusion at the CFPB and other federal financial regulators, identify the issues regulated entities should consider in addressing those areas and deciding whether to conduct D&I self-assessments, and discuss the evolving Congressional and regulatory D&I landscape since 2015.  Click here to listen to the episode.

In this podcast, Alan Kaplinsky, who leads our Consumer Financial Services Group, interviews Todd Zywicki, a Professor of Law at George Mason University and leading consumer finance expert, on the CFPB’s authority to prohibit abusive conduct. After reviewing how the CFPB has used its authority, Todd shares his views on what abusive means, how it differs from unfair or deceptive, what products or services can involve abusiveness, how the CFPB can best provide clarity, and the CFPB’s likely next steps in the wake of its symposium (at which Todd was a panelist).

Click here to listen to the podcast.

 

We have reported on the attempt by the U.S. Department of Housing and Urban Development (HUD) to impose new documentation requirements for down payment assistance provided by government entities to be used in connection with Federal Housing Administration (FHA) insured mortgage loans. For now, those efforts have come to an end.

Initially, HUD announced the requirements in Mortgagee Letter 2019-06. Significantly, the new requirements became effective for case numbers assigned on or after April 18, 2019, which was the date that the Mortgagee Letter was issued.

Next, in Mortgagee Letter 2019-07 HUD extended the effective date of the new requirements to case numbers assigned on or after July 23, 2019. HUD advised it extended the effective date to allow time for governmental entities to prepare the documentation described in Mortgagee Letter 2019-06. What HUD did not mention was that that CBC Mortgage Agency, which is an instrumentality of the Cedar Band of Paiutes Indian American tribe and operates the Chenoa Fund down payment assistance program, had filed a lawsuit in the U.S. District Court for Utah challenging HUD’s action.

Then, in July 2019 Judge David Neffer granted a preliminary injunction preventing HUD from implementing the requirements. Finally, in Mortgagee Letter 2019-10 HUD suspended the effective date of Mortgagee Letter 2019-06 until further notice. HUD also advised that mortgagees may continue to follow the guidance in HUD Handbook 4000.1 II.A.4.d.ii, which sets forth existing requirements regarding government-provided down payment assistance.

Now, HUD has thrown in the towel, at least temporarily, by announcing in Mortgagee Letter 2019-12 the rescission of all three Mortgagee Letters. HUD welcomes feedback from interested parties for a period of 30 days from the date of issuance of the Mortgagee Letter. Time will tell if HUD will make another attempt to impose the same type of requirements or seek to impose other requirements that it believes to be suitable alternatives.

In its proposed debt collection rules, the CFPB would allow a debt collector to satisfy the FDCPA requirement to provide the validation notice by sending the debtor an email or text message that includes a hyperlink to a secure website on which the notice is accessible, subject to a series of specific conditions set forth in the proposed rules.  The permissibility of that approach under the FDCPA was called into question by the decision issued last week by the U.S. Court of Appeals for the Seventh Circuit in Lavallee v. Med-1 Solutions, LLC.  In the decision, the Seventh Circuit ruled that the emails sent by a debt collector to the plaintiff containing hyperlinks to a server operated by the debt collector’s sister company on which the plaintiff could access and download the validation notices did not satisfy the FDCPA validation notice requirement.

The debt collector in Lavallee sent emails to the plaintiff that said nothing about a debt or debt collector in the subject line or body of the emails and included hyperlinks to a server on which she could have accessed .pdf files containing the validation notices and information about the debts.  The plaintiff never opened the emails and first learned about the debt collector when the creditor called her about another debt.  She subsequently called the debt collector to discuss her debts but the debt collector did not provide any disclosures during the phone call or send written disclosures thereafter.  The plaintiff filed a lawsuit against the debt collector in which she alleged that it had violated the FDCPA by failing to provide validation notices as required by the statute. The district court entered summary judgment in favor of the plaintiff, accepting the magistrate judge’s conclusion that the validation notices were never sent because the plaintiff never downloaded them.

After concluding that the plaintiff had alleged a concrete injury sufficient to establish constitutionally adequate standing, the Seventh Circuit rejected the debt collector’s argument that its emails satisfied the FDCPA because they were the initial communications and contained the validation notices.  (The debt collector conceded that if the phone conversation was the initial communication, it had not sent a validation notice within five days thereafter.)  The Seventh Circuit ruled that the emails were not “communications” under the FDCPA because they did not “at least imply the existence of a debt.”

However, as a “second and independent reason,” the Seventh Circuit ruled that the emails did not satisfy the FDCPA because “they did not themselves contain the enumerated disclosures. “ The FDCPA provides that the validation notice must be “contained in the initial communication” or provided in a written notice “containing” the validation notice that is sent within five days after the initial communication.  According to the Seventh Circuit, “at best, the emails provided a digital pathway to access the required information” but they did not “contain” such information.

In an amicus brief filed with the Seventh Circuit, the CFPB argued that the Seventh Circuit should affirm on the grounds that the linked validation notices did not satisfy the FDCPA requirement for the notices to be in writing because the debt collector had not complied with the E-SIGN Act.  (The CFPB did not address the debt collector’s argument that the validation notices were contained the initial communications, i.e. the emails, via the hyperlinks.)  The Seventh Circuit ruled that it did not need to consider the CFPB’s argument because it had resolved the appeal in the plaintiff’s favor on other grounds and noted that it did not usually consider arguments introduced on appeal by an amicus for the first time.

In its proposed debt collection rules, the CFPB would allow a debt collector, subject to certain conditions, to provide the validation notice on a secure website that the debtor can access by clicking on a hyperlink included in an email or text message sent to the debtor.  The Seventh Circuit’s ruling that an email that included a hyperlink did not “contain” the validation notice casts doubt on whether the CFPB’s proposed approach would satisfy a debt collector’s obligation to provide the validation notice.  Indeed, the inability of debt collector to use a hyperlink to provide the validation notice would completely eliminate text messages as a viable method for sending the validation notice, because a text message could not “contain” the required disclosures or support the formatting requirements set forth in the Bureau’s proposed rules for validation notices.  Accordingly, if the CFPB’s proposal regarding the use of hyperlinks is adopted, debt collectors wishing to send validation notices electronically in the Seventh Circuit and elsewhere will need to consider whether to avoid the use of hyperlinks and only send emails that include the text of the notice.  (If the CFPB’s interpretation of the FDCPA allowing the use of hyperlinks were to be challenged, a court asked to defer to the CFPB’s interpretation of the FDCPA would, under a Chevron analysis, first need to conclude that the statutory language “contained” is ambiguous.)

The CFPB’s proposed debt collection rules would require a debt collector sending the text of the validation notice in an email to identify the purpose of the email by including in the subject line the name of the creditor to whom the debt is owed and an additional item of information identifying the debt other than the amount.  In Lavallee, the emails sent to the plaintiff said nothing about a debt or debt collector in the subject line or body of the emails.  The Seventh Circuit ruled that the emails were not “communications” for purposes of the FDCPA because they gave no indication that they related to a debt.  Thus, an email sent by a debt collector that complied with CFPB’s proposed requirements should not be vulnerable to a similar argument that it was not a “communication.”

 

 

The Federal Reserve Board has determined that the Federal Reserve should take the following two actions:

  • Develop a new interbank 24x7x365 real-time gross settlement (RTGS) service to be offered by the Federal Reserve Banks to directly support faster payments and to be called the FedNow Service
  • Explore expanding the hours of the Fedwire Funds Service and the National Settlement Service (NSS), up to 24x7x365 to support liquidity management in private-sector RTGS services for faster payments

The Fed’s determination is set forth in a notice and request for comment issued on August 5, with comments to be due on or before 90 days after the date the notice is published in the Federal Register.  The Fed reached its decision to proceed with the development of FedNow after considering the comments it received in response to a notice it published in the Federal Register in November 2018 seeking comment on potential actions it could take to advance the development of faster payments and support the modernization of payment services in the United States.

In the August notice, the Fed observes that it does not have plenary or supervisory authority over the U.S. payment system and instead has traditionally influenced retail payment markets through its role as an operator.  As a result, the Fed believes its operational role as a provider of interbank settlement is the most effective approach “to improve the prospects of ubiquitous, safe, and efficient payments in the United States.”  In its view, serving this operational role would be consistent with its historical role as a provider of payment services alongside the private sector.

The Fed indicates that it “is committed to launching the FedNow Service as soon as practically possible” and that “[p]ending engagement with the industry, the Board anticipates that the FedNow Service will be available in 2023 or 2024.”  Observing that nationwide reach rather than initial availability is a “critical measure of success for faster payments” and that it expects achieving such reach will take longer regardless of when the service is initially available, the Fed states that it “will engage quickly with industry participants to gather input for finalizing the initial design and features of the service” and that once the initial design and features are finalized, the Fed “will publish a final service description in a subsequent Federal Register notice, with additional information provided through existing Reserve Bank communication channels.”

FedNow features.   Key features of the FedNow Service would include:

  • It would be available to banks eligible to hold accounts at the Reserve Banks under applicable federal statutes and Fed rules, policies, and procedures, and a participating bank could designate a service provider or agent to submit or receive payment instructions on its behalf and could choose to settle payments in the account of a correspondent bank.
  • It would be designed to support credit transfers, where a sender initiates a payment to an intended receiver for a variety of use cases, such as person-to-person payments, bill payments, and business-to-business payments, with the maximum value of transactions initially limited to $25,000.
  • It would settle interbank obligations through debit and credit entries to balances in the banks’ master accounts at the Reserve Banks, with all settlement entries for transactions through FedNow to be final.
  • A participating bank would be required to make the funds associated with individual payments available to its end-user customers immediately after receiving notice of settlement from FedNow.
  • It would have the ability to process a large volume of payments rapidly, incorporate, in addition to interbank settlement information, messaging required to complete end-to-end payments and would support the inclusion of additional descriptive information related to a payment.
  • FedNow’s 24x7x365 continuous processing of payments would not be affected by the existence of the opening and closing times, with end-of-day balances to be calculated for master accounts on each calendar day, including weekends and holidays, and banks would be expected to maintain a positive end-of-day balance each day and avoid overnight overdrafts.
  • A “business day” would be established by setting opening (beginning-of-day) and closing (end-of-day) times (in eastern time), with this business day used to determine end-of-day balances, conduct associated reserve and interest calculations, and for transaction reporting and account reconciliation purposes.

The Fed views an RTGS service that it provides as particularly important for smaller and midsize banks seeking to implement faster payment services. It suggests that the relatively high cost and difficulty of onboarding such banks to an RTGS service would likely be a significant obstacle for private-sector operators in building the connections and customer service capabilities needed to onboard the significant number of smaller banks needed to achieve true nationwide reach.  The Fed indicates that it has already made substantial investments in such capabilities and has significant experience and expertise in providing services to smaller banks.  It believes its long-standing relationships with and connections to thousands of banks across the country provide a solid foundation for FedNow to facilitate those banks gaining access to an RTGS infrastructure for faster payments and that FedNow can therefore be reasonably expected to reach thousands of banks that might not otherwise have access to an RTGS infrastructure.

The Fed also discusses the issue of interoperability via direct exchange of payments between RTGS infrastructure operators so as to allow payment originated by a participant of one service to be received by a participant of another service.  It notes that large banks and private-sector operators commenting on its November 2018 notice expressed significant concerns that interoperability posed potentially insurmountable technical and operational challenges.  While the Fed expresses agreement with the position that interoperability is a desired outcome, it states that it may be difficult to achieve, particularly early on.  It further states that as opposed to interoperability in and of itself, it views nationwide reach as a key objective for RTGS infrastructure and that such reach does not inherently depend on interoperability.  The Fed indicates that it intends to explore interoperability and other paths to achieving nationwide reach during its engagement with industry.

The notice includes the Fed’s initial competitive impact analysis, which looks at whether FedNow would have a direct and material adverse effect on the ability of other service providers to compete effectively with the Fed in providing similar services due to differing legal powers or constraints or due to a dominant position of the Fed deriving from such legal differences.

Expanding Fedwire Funds Service and NSS Hours.  Observing that RTGS-based faster payment services require banks to have sufficient liquidity to perform interbank settlement at any time and on any day, the Fed indicates that it believes expanding the hours of the Fedwire Funds Service and NSS would be the most effective way to provide such liquidity and could provide additional benefits to financial markets.  In its view, the ability to transfer funds from master accounts to a joint account during nonstandard business hours would allow participants in a private-sector RTGS service to manage liquidity on a “just-in-time” basis and remove the need to increase funding in a joint account ahead of weekends, holidays, and other times when liquidity transfers are not currently possible.  Such liquidity management would also decrease the likelihood that a bank would have insufficient liquidity to settle a payment and reduce the risk that an individual or business would experience incomplete payment.  In light of the potential benefits, the Fed plans to explore the expansion of the Fedwire Funds Service and NSS hours but indicates that additional analysis is needed to fully evaluate the relevant operational, risk, and policy considerations for the Reserve Banks and participants.  In light of the potential benefits, the Fed plans to engage with industry on issues related to expanded Fedwire Funds Service and NSS operating hours, as well as potential approaches for expanding those hours.

 

 

The DOJ has filed an amicus brief in support of the defendant debt collector in Rotkiske v. Klemm, the case before the U.S. Supreme Court that hopefully will resolve a circuit court split over whether the FDCPA one-year statute of limitations (SOL) runs from the date of the alleged violation or starts upon a consumer’s discovery of the violation.  The brief lists CFPB attorneys and DOJ attorneys (including the Solicitor General).

The FDCPA provides that “[a]n action to enforce any liability created by this subchapter may be brought in any appropriate United States District Court…within one year from the date on which the violation occurs.”  In Rotkiske, the plaintiff alleged that the defendant violated the FDCPA by obtaining a default judgment against him based on service of a complaint at an address the defendant knew or should have known was incorrect.

An en banc U.S. Court of Appeals for the Third Circuit rejected the plaintiff’s argument that the FDCPA’s one-year SOL did not begin to run until he discovered the default judgment upon applying for a mortgage loan approximately five years after service of the complaint.  Instead, based on the statutory text, the Third Circuit held that the SOL runs from the date of the violation.  Unlike the Third Circuit, the Fourth and Ninth Circuits have held that the discovery rule does apply to the FDCPA’s one-year SOL.

The DOJ makes the following primary arguments in support of its position that the FDCPA SOL runs from the date of the alleged violation:

  • The FDCPA’s plain text unambiguously makes the occurrence of an alleged violation the SOL’s starting point.
  • SCOTUS has never adopted a general presumption that federal SOLs should be read to incorporate a discovery rule and even if such a presumption existed, it would be overcome by the FDCPA’s plain text.
  • While equitable principles may sometimes warrant excusing a plaintiff’s failure to satisfy an SOL or preclude a defendant from asserting untimeliness as a defense, the plaintiff abandoned that argument on appeal and there is no basis to overturn the Third Circuit’s en banc decision based on equitable tolling.  (The plaintiff had alleged that the defendant  purposefully ensured that he could not properly be served and filed a false affidavit of service attesting that he had been properly served.  The DOJ concedes that these allegations, if true, might warrant application of equitable tolling.  It states that if SCOTUS were to conclude that consideration of equitable tolling is essential to proper analysis of the question presented, it should dismiss the writ of certiorari as improvidently granted.)

 

The New York Department of Financial Services (NYDFS) has issued proposed regulations to implement the legislation enacted in April 2019 that requires servicers of student loans to be licensed, imposes servicing standards, and prohibits certain practices.  On July 31, the NYDFS published a notice of proposed rulemaking in the State Register, triggering a 60-day comment period.

The licensing requirement would apply to “every person engaged in the business of servicing student loans owed.”  The activities that would constitute “servicing” include any of the following:

  • “receiving any payment from a borrower pursuant to the terms of any student loan”
  • “applying any payment to a borrower’s account pursuant to the terms of a student loan or the contract governing the servicing of any such loan”
  • “during a period where a borrower is not required to make a payment on a student loan, maintaining account records for the student loan and communicating with the borrower regarding the student loan on behalf of the owner of the student loan promissory note”
  • in conjunction with the activities above, providing notice of amounts owed on a student loan, performing other administrative services with respect to a student loan, or interacting with a borrower with respect to an attempt to avoid default and facilitating either of the first two activities above

“Servicing” would not include “collecting, or attempting to collect, on a defaulted student loan for which no payment has been received for 270 days or more.”  Exempt entities would include banks and credit unions, servicers of only federal student loans, and debt collectors whose student loan collection business involves collecting or attempting to collect on student loans for which no payment has been received for 270 days or more and who do not service non-defaulted student loans as part of their business.

A “student loan” would mean “any loan to a borrower to finance postsecondary education or expenses related to postsecondary education” and includes federal and private student loans.  A “borrower” is defined as “any resident of this state who has received a student loan or agreed in writing to pay a student loan or any person who shares a legal obligation with such resident for repaying a student loan.”  The servicing standards in the proposal include:

  • Rules for crediting payments and applying “nonconforming payments,” which are defined as “an overpayment or a partial payment”
  • Requirements regarding consumer reporting and transfers of servicing
  • Required disclosures of loan repayment options and loan forgiveness benefits
  • Making specified account information available free of charge on the servicer’s website
  • For servicers of private student loan, a required disclosure regarding the availability and criteria for a cosigner release
  • Rules for providing customer service and handling consumer complaints and inquiries

Student loan servicers would also be required to comply with New York regulations on cybersecurity.  The practices prohibited by the proposal include “misapplying payments to the outstanding balance of any student loan or to any related interest or fees” and engaging in any “unfair, deceptive, abusive, or predatory act or practice.”  The proposal includes definitions for the terms “unfair” and “abusive.”

 

On July 31, 2019, the Office of the Comptroller of the Currency (the “OCC“) released OCC Bulletin 2019-40 (the “Bulletin”) detailing guidelines for national banks, federal savings associations and federal branches of foreign banking organizations subject to the Community Reinvestment Act (the “CRA”) requesting designation as a wholesale or limited purpose bank under the CRA or otherwise requesting confirmation as a special purpose bank pursuant to CRA regulations.

Among other things, the Bulletin details the information requirements necessary for a bank to substantiate its designation or exemption request, instructions on how to submit requests and an overview of the OCC’s review and approval processes for each designation or exemption category. It also provides guidance on how banks may request confidential treatment of certain information submitted pursuant to a designation or exemption request that might otherwise be subject to the Freedom of Information Act request.

The Bulletin rescinds and replaces an attachment to OCC Bulletin 1996-11 entitled “Community Reinvestment Act: Guidelines for Requesting Designation as a Wholesale or Limited-Purpose Institution.”

A new CFPB blog post titled “An update on credit access and the Bureau’s first No-Action Letter” provides a boost to lenders using alternative data and machine learning in their underwriting models.

The Bureau issued its first (and so far only) no-action letter in September 2017 to Upstart Network Inc. stating that the CFPB had no present intention to take enforcement or supervisory action against the lender under the ECOA relating to the lender’s underwriting model, and especially its use of certain alternative data fields.  The letter was conditioned on Upstart’s agreement to a model risk management and compliance plan that required it to analyze and address risks to consumers, and assess the real-world impact of alternative data and machine learning. In its blog post, the CFPB shares results provided by Upstart of simulations and analyses it conducted pursuant to that plan.

The results showed that Upstart’s model using alternative data and machine learning approved 27% more applications than a traditional lending model and yielded 16% lower average APRs. The expansion of credit access reflected in the results occurred “across all tested race, ethnicity, and sex segments” and “significantly expand[ed]” access in “many consumer segments,” such as “near prime” consumers, applicants under 25 years of age, and consumers with incomes under $50,000.  The CFPB stated that “with regard to fair lending testing, which compared the tested model with the traditional model, the approval rate and APR analysis results provided for minority, female, and 62 and older applicants show no disparities that require further fair lending analysis under the compliance plan.”

In the blog post, the CFPB encourages lenders “to develop innovative means of increasing fair, equitable, and nondiscriminatory access to credit, particularly for credit invisibles and those whose credit history or lack thereof limits their credit access or increases their cost of credit, while maintaining a compliance management program that appropriately identifies and addresses risks of legal violations.”

The blog post concludes with the CFPB’s statement that it is “currently reviewing comments to its proposed No-Action Letter, Trial Disclosure, and Product Sandbox policies.”  In September 2018, the Bureau proposed significant revisions to its “Policy to Encourage Trial Disclosure Programs” which sets forth the Bureau’s standards and procedures for exempting individual companies, on a case-by-case basis, from applicable federal disclosure requirements to allow those companies to test trial disclosures.  (Upstart’s no-action letter was issued under these procedures.)  In December 2018, the CFPB issued proposed revisions to its 2016 final policy on issuing no-action letters, together with a proposal to create a new “product sandbox.”

The CFPB, in its July 2019 fair lending report, discussed supervisory reviews of alternative credit scoring models. It stated that in 2018, the Office of Fair Lending recommended supervisory reviews of third-party scoring models that would “focus on obtaining information about the models and compliance systems of third-party scoring companies for the purpose of assessing fair lending risks to consumers and whether the models are likely to increase access to credit.  Observations from these reviews are expected to further the Bureau’s interest in identifying potential benefits and risks associated with the use of alternative data and modeling techniques.”  The Bureau commented that while a significant focus of its interest is on how alternative data and modeling can expand credit access for credit invisibles, it is also interested in other potential direct or indirect benefits to consumers, “including enhanced creditworthiness predictions, more timely information about a consumer, lower costs, and operational improvements.”

The use of algorithmic models to assess credit risk or other objectives is specifically addressed by HUD in its soon to be released proposed revisions to its 2013 rule under which HUD or a private plaintiff can establish liability under the Fair Housing Act for discriminatory practices based on disparate impact even if there is no discriminatory intent.  The proposed revisions include defenses that a defendant can use to establish that the plaintiff’s allegations do not support a prima facie case where the cause of a discriminatory effect is alleged to be a model used by the defendant such as a risk assessment algorithm.

Lawmakers are also focusing on the use of algorithms by consumer financial services providers.  Earlier this year, the House Financial Services Committee established two task forces, one on financial technology and the other on artificial intelligence.  Both task forces held their first meetings in June.  Also in June, Democratic Senators Elizabeth Warren and Doug Jones sent a letter to the CFPB, Federal Reserve, OCC, and FDIC expressing concern that fintech and traditional lenders using algorithms in their underwriting processes may be engaging in unlawful discrimination.  The letter sought answers to a series of questions, including what the agencies are doing “to identify and combat lending discrimination by lenders who use algorithms for underwriting” and what analyses the agencies have conducted or plan to conduct regarding “the impact of FinTech companies or use of FinTech algorithms on minority borrowers, including differences in credit availability and pricing.”

Our weekly podcasts include an episode released in June titled, “Using artificial intelligence for consumer finance: a look at the opportunities and challenges.”  In the episode, we discussed the opportunities and challenges created by the use of AI models in consumer financial services, including the benefits of explainable AI and its implications for the consumer financial services industry, especially for applications where understanding the model’s reasons for returning a score or decision are necessary.  Click here to listen to the podcast.

 

 

The Texas federal district court hearing the lawsuit filed by two trade groups challenging the CFPB’s final payday/auto title/high-rate installment loan rule (Payday Rule) entered an order on August 6 that once again continues the stay of the lawsuit and the August 19, 2019 compliance date for both the Payday Rule’s ability-to-repay (ATR) provisions and its payment provisions.  The order directs the parties to file another joint status report by December 6 “informing the court about proceedings related to the Rule and this litigation as the parties deem appropriate.”

The order follows the filing of the most recent status report on August 2 by the CFPB and trade groups.  In the report, the parties stated that they “are not requesting that the Court lift the stay of the litigation or lift the stay of the compliance date at this time.”  (Although the Bureau’s final rule delaying the compliance date for the ATR provisions left unchanged the August 19 compliance date for the Payday Rule’s payment provisions, the stay of the compliance date entered by the court on November 6, 2018 stayed the compliance date for both the ATR and the payment provisions.)

Thus, companies subject to the payment provisions of the Payday Rule will almost certainly have a respite of at least two and a half months (and likely longer) before the payment provisions will become applicable.