Payday lenders have won an offer to delay a Consumer Financial Protection Bureau rule limiting their access to customers’ bank accounts to collect payments.
Payday lenders and auto title lenders do not have to comply with the CFPB rule while the Community Financial Services Association of America and a Texas-based trade group appeal a district court ruling in favor of the office, the United States Court of Appeals for the Fifth Circuit. said in an Oct. 14 decision.
The CFPB rule requires payday and vehicle title lenders to be granted permission to access a consumer’s bank account after two failed attempts to collect short-term, high-cost same day payday loans among other provisions.
Judge Lee Yeakel of the U.S. District Court for the Western District of Texas began a 286-day transition period in August for the rule to take effect after dismissing the industry group’s challenge. The Fifth Circuit said in its unanimous order that the transition period would not begin until the appeal process was completed.
Justices Jerry E. Smith, Stephen A. Higginson and Don R. Willett signed the order.
The court order will allow payday lenders to continue doing business as the litigation progresses, the CFSA said in a statement on Friday.
“Without the extended stay of the Fifth Circuit, our members would have been forced to devote considerable time and resources to getting into compliance before the Fifth Circuit had a chance to resolve our appeal,” the industry group said. .
The CFPB declined to comment.
The CFPB had set an effective date of June 13, 2022 for the rule following Yeakel’s decision. The district court judge dismissed the industry’s request to suspend regulation while business groups appealed his ruling to the Fifth Circuit.
The rule under appeal is a light version of the rule first published in October 2017 by former Obama-appointed director Richard Cordray.
The original rules included strict requirements for lenders to determine a borrower’s ability to repay a payday loan or vehicle title, which can have interest rates of up to 400%. The CFPB also imposed cooling off periods after a borrower took out three loans in a short period of time.
The Trump administration repealed these provisions, but maintained restrictions on payday lenders’ access to consumer bank accounts.
Consumer advocates are hoping President Biden’s CFPB director Rohit Chopra will reinstate the repayment capacity provisions and reflective requirements.
Chopra was sworn in to his post on October 12.
The case is Cmty. Fin. Serves. Ass’n. of Am., Ltd. v. CFPB, 5th Cir., No. 21-50826, suspension granted 10/14/21.