Fifth Circuit Holds Oral Argument in Challenge to CFPB's Payday Lending Rule Payment Provisions

Posted: May 26, 2022 | Author: Consumer Finance Monitor
CFPB  compliance  Consumer Finance Monitor  lending & collections  payday lending  Payday Lending Rule 

Recently, the U.S. Court of Appeals for the Fifth Circuit held oral argument in the appeal filed by industry trade groups challenging the payment provisions of the CFPB’s 2017 Payday Lending Rule.

Previously, the U.S. District Court for the Western District of Texas issued an order upholding the validity of the payment provisions of the CFPB’s Payday Loan Rule. The trade groups appealed from that district court’s final judgment granting the CFPB’s summary judgment motion. Under the district court’s order, compliance with the payment provisions had been scheduled to become mandatory on June 13, 2022. However, after the appeal was filed, the Fifth Circuit entered an order staying the compliance date of the payment provisions until 286 days after the trade groups’ appeal is resolved. So, the compliance date of the payment provisions has been stayed pending resolution of the industry trade groups’ appeal.

The payment provisions prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals. The payment provisions also require lenders to provide consumers with written notice before making their first attempt to withdraw payment from their accounts and before subsequent attempts that involve different dates, amounts, or payment channels.

Note that the underwriting provisions of the original payday rule have been repealed and the legal challenge to that repeal has been dismissed. But that dismissal may still be appealed and the new CFPB leadership may seek to impose underwriting provisions through a new rulemaking. Also, the CFPB may still decide to pursue certain conduct through its general UDAAP authority.

The payment-related provisions are found in Subpart C of the Payday Lending Rule (12 C.F.R. 1041.7 – 1041.9). 


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