Magazine article American Banker

Federal Judge Rejects CFPB's Effort to Halt Payday Rule

Magazine article American Banker

Federal Judge Rejects CFPB's Effort to Halt Payday Rule

Article excerpt

Byline: Kate Berry

A federal court dealt a blow to efforts by the Consumer Financial Protection Bureau to slow down the agency's payday lending rule.

U.S. District Judge Lee Yeakel on Tuesday denied the request by acting CFPB Director Mick Mulvaney that the court delay the payday rule's effective date, which is set for next year.

Mulvaney had sided with two industry trade groups -- the Community Financial Services Association of America and Consumer Service Alliance of Texas -- that sued the CFPB in April to invalidate the tough restrictions on small-dollar loan providers. The rule was written under former CFPB Director Richard Cordray.

The CFPB in January said it plans to reopen the payday lending rule, which goes into effect Aug. 19, 2019.

The CFPB's request was another illustration of the sea change at the agency since Cordray stepped down in November. Mulvaney also has dropped several investigations into installment lenders including World Acceptance Corp., based in Greenville, S.C., which had a political action committee that made campaign contributions to Mulvaney when he was a lawmaker.

The small-dollar rule, which was finalized in October under Cordray, requires lenders to determine a borrower's ability to repay a short-term loan of 45 days or less.

"This is not a good development for the industry," Alan Kaplinsky, co-practice leader of Ballard Spahr's Consumer Financial Services Group, said of the ruling.

Consumer advocates hailed the ruling, noting that the CFPB had conducted more than five years of research, analysis and public outreach in developing a rule to keep payday lenders from trapping consumers in a cycle of debt. …

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