CFPB Payday Lending Rule to Take Effect March 30, 2025, Appeals Court Determines
Last week, a panel of the Fifth U.S. Circuit Court of Appeals set March 30, 2025 as the effective date of the Consumer Financial Protection Bureau’s (CFPB) payday lending rule. The rule limits interest rates and other provisions of payday loans, and was challenged by lending groups until the Supreme Court ruled that the CFPB’s funding mechanism was constitutional.
The Fifth Circuit previously set a date 286 days “from the resolution of the appeal” as the rule’s effective date, but it was unclear as to when that period would start. The latest order relies on the date the Supreme Court ruled that the CFPB’s funding structure is constitutional, which was also challenged by lending groups.
According to Consumer Affairs, the appeals court recently denied a request made by the Community Financial Services Association of America (CFSA) to hold a hearing on the agency’s challenge to the rule. However, Consumer Finance Monitor noted that the CFSA said that it would seek reconsideration and further review if the request was denied.
The CFPB’s payday lending rule was finalized in 2017 in an effort to protect borrowers from abusive practices. It aims to prevent borrowers from falling into debt cycles due to short-term, high-interest loans that they struggle to repay.
Under the rule, lenders were required to determine that consumers could repay loans without defaulting or reborrowing, but the CFPB rescinded this provision in 2020. The rule also places limits on loan rollovers and requires lenders to provide clear disclosures about the cost of loans.
The payday lending rule restricts lenders from making more than two failed attempts to withdraw funds from a consumer’s account. After two unsuccessful attempts, the lender has to obtain new authorization from the lender to withdraw from their account.
