Overturning the CFPB’s final payday loan rule by reopening rulemaking or CRA resolution
On December 1, 2018, three Democrat and three Republican members of the House of Representatives introduced a joint resolution under the Congressional Review Act (H.J. Res. 122) to override the CFPB’s final payday/auto title/high-rate installment loan rule. The CRA is the vehicle used by Congress to overturn the CFPB’s arbitration rule in a party-line vote.
In a new blog post entitled “7 Reasons to Oppose the Federal Payday Loan Rule,” a policy analyst at the Competitive Enterprise Institute supports use of the CRA to overturn the payday loan rule. Among the seven reasons discussed in the blog are that the rule leaves low-to-middle income consumers without access to credit, payday loan users overwhelmingly approve of the product, and the rule is built on a flawed theory of consumer harm.
The CFPB’s final payday became “effective” this past Tuesday, January 16, 2018. However, 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. While the CFPB announced yesterday that it intends to engage in a rulemaking process to reconsider the final rule, it normally cannot do so without following the time-consuming notice and comment procedures of the Administrative Procedure Act. In addition, since any changes made by the CFPB are likely to be challenged in litigation, the CFPB will need to successfully defend a revised rule or its withdrawal of the existing rule.
Given the hurdles created by the rulemaking process, the CRA provides a “cleaner” and quicker vehicle for overturning the final rule. Republican Congressman Dennis Ross, one of the CRA resolution’s sponsors, is reported to have said that despite the CFPB’s announcement, he intends to continue to seek passage of the resolution by Congress.
Both high-rate loans covered by the final rule and the final rule itself are highly controversial. Accordingly, there can be no assurance that the majorities needed to override the rule under the CRA can be assembled in both the House and the Senate. Nevertheless, whether through the CRA, new rulemaking, or litigation, we continue to expect that the final rule adopted under former CFPB Director Richard Cordray will not be implemented in anything approaching its current form.