The CFPB has issued its long-awaited final rule rescinding the ability-to-repay provisions in its final payday/auto title/high-rate installment loan rule (Payday Rule). The final rule will be effective 90 days after its publication in the Federal Register.
The CFPB also issued a document in which it affirmed and ratified the Payday Rule’s payments provisions. The document states that the ratification relates back to November 17, 2017, the date the Payday Rule was published in the Federal Register. The ratification is intended to preserve the validity of the payments provisions in response to the U.S. Supreme Court’s decision last week in Seila Law which held that the Dodd-Frank provision that only allows the President to remove the CFPB Director “for cause” violates the separation of powers in the U.S. Constitution.
The compliance date for the payments provisions has been stayed pursuant to an order entered by the Texas federal district court hearing the lawsuit filed against the CFPB challenging the Payday Rule. The Bureau states in its press release that it “will seek to have [the payments provisions] go into effect with a reasonable period for entities to come into compliance.” (The CFPB also issued a separate document today in which it purported to ratify most regulatory actions the Bureau took from January 4, 2012 through June 30, 2020. We will discuss that ratification in a separate blog post.)
In its press release, the CFPB announced that it has denied the petition it received to commence a rulemaking to exclude debit and prepaid cards from the payments provisions. We are disappointed that the Bureau decided not to address this issue as well as the payments provisions’ other serious shortcomings that we have highlighted in previous blogs and in letters to the CFPB.
The Bureau also announced that it has issued guidance to clarify the payments provisions’ scope and assist lenders in complying with the provisions. In addition, it announced that it plans to conduct research on developing potential disclosures to provide consumers with information to help them better understand certain features of payday loans.
There could be an effort to override the final rule under the Congressional Review Act and the Bureau is likely to face a lawsuit challenging the final rule under the Administrative Procedure Act.
We are now reviewing the final rule and guidance and will provide our thoughts in future blogs.