July 21, 2018

July 20, 2018

Subscribe to Latest Legal News and Analysis

July 19, 2018

Subscribe to Latest Legal News and Analysis

July 18, 2018

Subscribe to Latest Legal News and Analysis

Judge Denies Request to Stay Payday Rule Compliance Date

On June 12, 2018, a federal judge in the Western District of Texas denied a joint motion by the Bureau of Consumer Financial Protection (“Bureau”), the Community Financial Services Association of America, Ltd. (“Community Financial Services Association”) and the Consumer Alliance of Texas (“Consumer Alliance”), to stay the compliance date of the substantive provisions of the Bureau’s payday lending rule (“Payday Rule”), which is August 19, 2019, for most provisions. The Community Financial Services Association and Consumer Alliance are suing the Bureau over the Payday Rule, alleging, among other things, that the Bureau’s rulemaking process was fatally flawed and that the rule constituted agency overreach. The court did grant a simultaneous joint motion to stay the litigation itself pending completion of the rulemaking process.

The Bureau and the plaintiffs had argued that a stay of both the litigation and the rule’s compliance date were necessary because of the Bureau’s January announcement that it intends to reconsider the Payday Rule. The litigation should be stayed, they argued, because the reconsideration of the Payday Rule could render the case moot or require amending the complaint. In addition, they asked the court to stay the compliance date to “prevent irreparable injury” to affected companies that would have “no way to know whether Plaintiffs’ members will ultimately need to comply with the Payday Rule, a modified payday rule, or no rule at all.” In the absence of a stay, the parties agreed, lenders would have to begin costly preparations well before the Bureau might take action to significantly change or repeal the rule. Several consumer advocacy groups objected to the Bureau’s joining the motion, and filed an amicus brief with the court opposing the joint motion. Ultimately, the judge agreed to stay the litigation, but not the rule’s compliance date. With the decision, the Bureau may have to find another way to provide the industry with relief from the costs of preparing for a rule that may be changed. In its Spring 2018 rulemaking agenda, the Bureau targeted February 2019 for proposing a modified rule.

© 2018 Covington & Burling LLP

TRENDING LEGAL ANALYSIS


About this Author

Jason Grimes, corporate lawyer, Covington
Associate

Jason Grimes is an associate in the firm’s financial institutions and futures and derivatives practice groups. He advises clients on a wide range of regulatory matters, including compliance with various state and federal banking laws, and compliance with the Commodity Exchange Act.

Representative Matters

  • Advised a CFTC-registered swap dealer on compliance issues related to trading on swap execution facilities
  • Advised a major financial institution in connection with the treatment of non-deliverable...
202-662-5846