Appeals Court Delays Implementation of Payday Lending Rule
Earlier this month, the U.S. Court of Appeals for the Fifth Circuit approved a delay in the implementation of the Consumer Financial Protection Bureau (CFPB)’s payday lending rule. The court determined that payday and auto title lenders do not have to comply with the CFPB’s rule, set to take effect in June, while a previous court decision in favor of the CFPB moves through the appeal process.
According to American Banker, the decision to delay the rule comes as a win for small-dollar lenders that disputed the rule’s restrictions on consumer bank account access.
The issue at hand is a provision in the rule that restricted lenders’ ability to withdraw funds from consumers’ accounts after two consecutive declined attempts, unless consumers agreed to additional withdrawals. Lenders would also be obligated to give consumers written notice before their first attempt to withdraw a payment from their bank account.
The court’s order will permit lenders to continue doing business as the litigation moves forward.
“Without the Fifth Circuit’s extension of the stay, our members would have been forced to expend considerable time and resources coming into compliance before the Fifth Circuit had an opportunity to resolve our appeal,” said the Community Financial Services Association (CFSA), according to Bloomberg Law. CFSA and the Consumer Service Alliance of Texas are the parties appealing the previous decision.
On August 11, 2020, the CFPB issued a Frequently Asked Questions (FAQ) document about the Small Dollar Lending Rule.