The Consumer Financial Protection Bureau (CFPB) issued the final Payday Lending Rule in November 2017 to establish regulations for payday loans, vehicle title loans, and certain high-cost installment loans.
• Identified the underwriting of payday loans without an ability-to-repay determination as an unfair and abusive practice (referred to as the mandatory underwriting provisions).
• Established certain requirements and limitations with respect to attempts by the lender to withdraw payments from member accounts in ways that could rack up excessive fees or deviate from what the borrower expects (referred to as the payment provisions).
These provisions originally had a compliance date of Aug. 19, 2019. However, in February 2019, CFPB issued two notices of proposed rulemaking (NPRMs) seeking comment on whether to rescind the mandatory underwriting provisions of the 2017 final rule and whether to delay the compliance date to Nov. 19, 2020.
At the time, the agency stated it was preliminarily finding that rescinding this requirement would increase consumer access to credit.
CFPB decided to revisit the mandatory underwriting provisions after reviewing the comments received on the February 2019 NPRM. Note that the agency did not propose reconsideration of the payment provisions of the 2017 final rule.
The agency issued a final rule on June 6, 2019, which delayed the compliance date for the mandatory underwriting provisions by 15 months to Nov. 19, 2020.
Texas court ruling
As of the publication of this article, the compliance date for both the mandatory underwriting provisions and the payment provisions is stayed pursuant to a court order (issued in Community Financial Services Association of America Ltd., et al. v. Consumer Financial Protection Bureau et al., No. 1:18-cv-00295 [W.D. Tex. Nov. 6, 2018]).
As a result, credit unions have no obligation to comply with the payday lending rule until the court-ordered stay is lifted.
This stay applies to all provisions of the payday lending rule and to all credit unions, even those outside the jurisdiction of the Texas court. The parties are expected to provide their next status update to the court on Dec. 6, 2019.
At that time, if the stay is lifted, the payment provisions of the payday lending rule would be in effect. As discussed above, the compliance date for the mandatory underwriting provisions is delayed to Nov. 19, 2020.
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