CFPB Left with Rulemaking to Modify or Delay Payday Rule

By: Jennifer Janeira Nagle, Robert W. Sparkes, Scott B. Hefferman

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.