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CFPB Left With Rulemaking To Modify Or Delay Payday Rule

On Tuesday, June 12, 2018, a Texas federal judge denied a joint request from the Consumer Financial Protection Bureau (“CFPB”) and two payday-lending trade groups to stay the August 2019 deadline for industry compliance with the Payday Loan Rule (the “Rule”). The decision was issued in Community Financial Services Association of America, Ltd., v. Consumer Financial Protection Bureau, No. 1:18-cv-295-LY, an action that was filed in April 2018 by the trade groups against the CFPB, seeking to invalidate the Rule as arbitrary and capricious in violation of the Administrative Procedures Act (“APA”), among other things.  (For more about the litigation, click here.)  In late May 2018, the plaintiff trade groups and the defendant CFPB jointly asked the Court to stay the Rule’s compliance deadline, but the Court’s decision Tuesday quickly and summarily rejected that request.  The Court stayed only the litigation, leaving August 2019 as the operative date for industry participants to comply with the Rule.

The decision follows the recent expiration of time for lawmakers to roll back the Rule using a Congressional Review Act (“CRA”) resolution. Despite the introduction of two congressional resolutions calling for repeal of the Rule under the CRA, neither one made it through Congress. (For more about the resolutions, click here.)

With judicial and congressional options off the table for now (the parties could appeal the Texas court’s decision), the CFPB is left with rulemaking under the APA to make good on its January 16, 2018 statement that it “intends to engage in a rulemaking process so that the Bureau may reconsider the Payday Rule.”  All eyes will now be squarely on the CFPB to see if, and when, rulemaking is invoked and, if so, to what extent.  Rulemaking to substantively modify the Rule may take a backseat to a more immediate rulemaking process to extend the compliance deadline.  Until then, industry participants are on the clock, with about 14 months to go before compliance with the Rule is mandated.

Copyright 2020 K & L Gates


About this Author

Jennifer Nagle, KL Gates Law Firm, Financial Services Litigation Attorney

Ms. Nagle is a partner in the litigation department of the firm's Boston office. She concentrates her practice in complex commercial litigation, with emphases in financial institutions and services litigation and class action litigation defense. Ms. Nagle has also counseled clients on compliance with various consumer financial services laws, and in connection with government inquiries into various servicing practices.

Robert W. Sparkes III, Complex Civil and commercial Litigation, KL Gates, Law Firm

Mr. Sparkes is a partner in the Boston office of K&L Gates with extensive experience in complex civil and commercial litigation, including federal and state class action litigation. Mr. Sparkes is a member of the firm’s Financial Institution and Services Litigation group and the Class Action Litigation Defense group. He regularly represents banking, mortgage lending, mortgage servicing, consumer financial services institutions, and other business entities in consumer class actions and individual litigation matters in federal and state courts throughout the United States, including in Massachusetts, California, Missouri, Michigan, Connecticut, Ohio, Delaware, Maryland, Arizona, West Virginia, New Jersey, Vermont, Washington, Illinois, Pennsylvania, and New York. These actions often concern challenges under federal statutes, including the federal Real Estate Settlement Procedures Act, the Truth in Lending Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Racketeer Influenced and Corrupt Organizations Act, as well as state unfair and deceptive acts and practices statutes, and common law claims. Mr. Sparkes also has experience representing a variety of corporate and individual clients in contract, tort, class action, consumer protection, and other general business litigation and arbitration matters.

Scott Hefferman, Attorney, KL Gates

Scott Hefferman is an associate in the firm’s Boston office, where he is a member of the Complex Commercial Litigation & Disputes practice group.

Prior to joining the firm, Mr. Hefferman was a summer associate in the firm’s Boston office in 2016. In addition, he was a judicial intern for the Honorable Daniel A. Procaccini, Associate Justice, of the Rhode Island Superior Court and the Honorable William E. Smith, of the U.S. District Court of the District of Rhode Island.