Payday Trade Association Files Suit Challenging Small Dollar Rule
The Community Financial Services Association of America (CFSA), a trade group representing payday lenders, teamed up with the Consumer Service Alliance of Texas this week to file a complaint against the Consumer Financial Protection Bureau (CFPB) for the agency’s issuance late last year of its rule on “Payday, Vehicle Title, and Certain High-Cost Installment Loans.” CFSA CEO Dennis Shaul has been a frequent critic of the rule since its publication in November, saying:
“The CFPB has failed to conduct the necessary research to determine whom to protect and how best to protect them. Instead, it has prejudged an entire industry. It has proceeded with the unshakeable conviction that it is acting in the public interest because the bureau believes it understands customer needs better than the customers do. And the CFPB completely ignores that so many states already have effective payday lending regulations in place.”
In their complaint, the trade groups claim that the CFPB failed to follow the Administrative Procedures Act in reviewing and accounting for more than 1 million comments in favor of small dollar credit products. The organizations are also arguing that the structure of the Bureau is unconstitutional, echoing an argument recently resolved by an en banc D.C. Circuit in favor of the consumer agency.
CFSA may not need a federal court to nullify the rule. A few weeks ago, Senator Lindsey Graham (R- SC) introduced a bill to repeal the rule through the Congressional Review Act. The CFPB has also opened reconsideration of rule as part of a larger effort to remake the agency following the departure of former director Richard Cordray.