CFPB and trade groups file briefs on compliance date for payment provisions in payday loan rule

Ballard Spahr LLP

Ballard Spahr LLP

The CFPB and the two trade groups challenging the CFPB’s 2017 final payday/auto title/high-rate installment loan rule (2017 Rule) have filed briefs with the Texas federal court  regarding a compliance date for the 2017 Rule’s payment provisions.  The briefs were filed in response to the court’s order that requested additional briefing “concerning what would be the appropriate compliance date if the court were to deny Plaintiffs’ motion for summary judgment and grant Defendants’ motion for summary judgment.”

In its brief, the CFPB argues that the stay of the compliance date should remain in place for no more than 30 days after the court’s decision on summary judgment.  According to the Bureau, a 30-day extension would be consistent with the Administrative Procedure Act requirement of only 30 days’ notice before a rule can take effect.  The CFPB further argues that compliance with the payment provisions is not onerous because neither of the two basic requirements imposed by the payment provisions (i.e. new authorization for withdrawals after two failed attempts and new notices) “requires any major overhaul of lenders’ operations.”  Other factors given by the CFPB in support of its position are that (1) the trade group have had ample time to comply, (2) the trade groups could not have reasonably relied on the stay of the compliance date continuing beyond final judgment, and (3) a further extension of the stay is particularly unwarranted because the only basis for the stay (i.e. the unconstitutional removal provision) vanished when the U.S. Supreme Court decided Seila Law and former Director Kraninger ratified the payment provisions.

In their brief, the trade groups argue any order lifting the stay should set the compliance date no earlier than 445 days (or, at a minimum, 286 days) from the date the court lifts the stay, reflecting the time left for compliance when the stay was sought (or entered).  As originally promulgated, the 2017 Rule gave lenders 21 months before compliance would be required.  According to the trade groups, the stay tolled the compliance period and their members reasonably relied on the stay to defer “the lengthy and costly implementation process.”  They also argue that if the stay did not toll the compliance period, the Bureau will need to set a new compliance date via notice-and-comment rulemaking.  Finally, they argue that if the court grants the CFPB’s summary judgment motion, it should maintain the stay pending appeal.

The parties have until August 16 to file responses.  The briefing order provides that the “[t]he court will consider the matter fully briefed upon receipt of the parties’ responses and no reply briefs will be necessary.”  This means that in a worst case scenario, the court could grant the CFPB’s summary judgment motion by the end of this month and compliance with the payment provisions could be required in September.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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