April 23, 2019

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Plaintiffs in industry lawsuit challenging CFPB payday loan rule move for reconsideration

We have previously blogged about the industry challenge to the CFPB’s rule on payday/vehicle title/high rate installment loans.  The Plaintiffs’ have now filed an Unopposed Motion for Reconsideration and have advised that the CFPB intends to file a separate supporting memorandum.  In their Motion for Reconsideration, the Plaintiffs’ argue that a combined stay of litigation (previously approved by the Court) and stay of the Rules’ compliance dates (previously denied by the Court) –

would relieve the parties and the Court of the burdens of litigation that might not be needed, while at the same time protecting Plaintiffs’ members from having to comply with, and prepare for compliance with, an allegedly invalid rule….

But rather than grant or deny the motion in full, the Court’s order severed these two inextricably intertwined proposals. The order thereby granted a combination of relief that was not requested by the parties, and which undermines, rather than furthers, their agreed-upon solution to the dilemma discussed above. Staying the litigation while denying a stay of the Rule relieves the parties and the Court of the burdens of litigation, but it does so without relieving Plaintiffs of the need for litigation….  Thus, absent a stay of the compliance date, Plaintiffs will have no tenable option other than to file a motion for preliminary injunction (and a lift of the litigation stay).

(emphasis in original)

We fully subscribe to the views expressed in the Motion for Reconsideration.  However, we hope the CFPB is not putting all of its eggs in one basket and counting on the court to change its mind.  A second fallback approach—which we strongly recommend—is for the CFPB to engage in formal notice and comment rulemaking to extend the compliance deadline and provide breathing space for ensuing notice and comment rulemaking on the substance of the Rule.  We think the justification for such rulemaking, should it prove necessary, is compelling.

Copyright © by Ballard Spahr LLP

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About this Author

Jeremy T Rosenblum, consumer financial services group, finance partner, Philadelphia, Pennsylvania, Ballard Spahr, UDAAP, TILA
Partner

Jeremy T. Rosenblum is Co-Practice Leader of the firm's Consumer Financial Services Group. He has devoted the past 30 years in private practice to representing the consumer financial services industry.

Mr. Rosenblum's practice focuses on federal and state lending and consumer practices laws, with emphasis on the interplay between federal and state laws, joint ventures between banks and nonbank financial services providers, the development and documentation of new financial services products (especially products designed to serve the needs of...

215-864-8505
Kaplinksy, partner, New York, finance
Partner

Alan S. Kaplinsky is Co-Practice Leader of the firm's Consumer Financial Services Group, which has more than 115 lawyers. Mr. Kaplinsky devotes his practice exclusively to counseling financial institutions on bank regulatory and transactional matters, particularly consumer financial services law, and defending financial institutions that have been sued by consumers in individual and class action lawsuits and by government enforcement agencies. Visit Mr. Kaplinsky's profile in Wikipedia.

Mr. Kaplinsky is heavily involved in counseling and representing clients in a wide variety of matters (regulatory, supervisory and enforcement) involving the Consumer Financial Protection Bureau. He was instrumental in launching a blog, CFPBMonitor.com, focused on the Consumer Financial Protection Bureau.

Mr. Kaplinsky pioneered the use of pre-dispute arbitration provisions in consumer contracts, has counseled numerous consumer financial services companies on this subject, and has defended in court numerous companies that have sought to enforce consumer arbitration agreements.

215-864-8544