CFPB final payday/auto title/high-rate installment loan rule published in Federal Register
The CFPB’s final payday loan rule was published in today’s Federal Register. Lenders covered by the rule include nonbank entities as well as banks and credit unions. In addition to payday loans, the rule covers auto title loans, deposit advance products, and certain high-rate installment and open-end loans. For a summary of the rule, see our legal alert.
Since the rule’s effective and compliance dates are tied to the Federal Register publication date, those dates have now been set. The regulation is effective January 16, 2018. The compliance date for the rule’s substantive requirements and limits (Sections 1041.2 through 1041.10), compliance program/documentation requirements (Section 1041.12), and prohibition against evasion (Section 1041.13) is August 19, 2019. The deadline to submit an application for preliminary approval to be a registered information system is April 16, 2018.
We expect the rule’s publication to trigger the filing of an industry lawsuit challenging the rule within a matter of weeks. In addition, the rule could become the subject of a resolution of disapproval under the Congressional Review Act (CRA), the vehicle used by Congress to overturn the CFPB’s arbitration rule.
Under the CRA, the receipt of a final rule by Congress begins a period of 60 days during which a member of either chamber can introduce a joint resolution of disapproval. In calculating the 60 days, every calendar day is counted, including weekends and holiday, with the count paused only for periods when either chamber (or both) is gone for more than three days (i.e. pursuant to an adjournment resolution).
For purposes of the CRA, a rule is considered to have been “received by Congress” on the later of the date it is received in the Office of the Speaker of the House and the date of its referral to the appropriate Senate committee. The payday loan rule was received by the Speaker of the House on November 13 and referred to the Senate Banking Committee on November 15.
To be eligible for the special Senate procedure that allows a CRA disapproval resolution to be passed with only a simple majority, the Senate must act on the resolution during a period of 60 session days which begins on the later of the date when the rule is received by Congress and the date it is published in the Federal Register.
The final payday loan rule’s publication in the Federal Register is also a trigger for the filing of a petition with the Federal Stability Oversight Council (FSOC) to set aside the rule. The Dodd-Frank Act provides that such a petition must be filed “not later than 10 days” after a regulation has been published in the Federal Register. Efforts to use the FSOC mechanism to overturn the arbitration rule did not materialize.