Plaintiff in lawsuit challenging CFPB’s rescission of ability-to-repay provisions of 2017 payday loan rule files opposition to CFPB and CFSA motions to dismiss; CFPB and CFSA file replies

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The National Association for Latino Community Asset Builders (NALCAB) has filed its combined opposition to the motions of the CFPB and the Consumer Financial Services Association (CFSA) to dismiss NALCAB’s lawsuit challenging the CFPB’s rescission of the “ability-to-repay” (ATR) or “mandatory underwriting provisions” in its 2017 final payday/auto title/high-rate installment loan rule (2017 Rule).  The lawsuit seeks to overturn the CFPB’s July 2020 final rule (2020 Rule) that eliminated the ATR provisions but left in place the 2017 Rule’s payments provisions.  The CFSA intervened in the lawsuit.

When the CFPB filed its motion to dismiss, Acting CFPB Director Dave Uejio made clear that the motion was not intended to indicate that the “new CFPB” supports the 2020 Rule.  He explained in a blog post that the 2020 Rule “was challenged in court and the Bureau had a legal obligation to respond to the lawsuit,” which it did by filing a brief “addressing only the court’s jurisdiction to hear the case.”  He stated further that “the Bureau continues to believe that ability to repay is an important underwriting standard.  To the extent small dollar lenders’ business models continue to rely on consumers’ inability to repay, those practices cause harm that must be addressed by the CFPB.”

In its opposition to the motions to dismiss, NALCAB responds to the arguments made by the CFPB and CFSA challenging NALCAB’s Article III standing.  NALCAB argues that it has adequately established that it has standing to sue on its own behalf and on behalf of its member, Mission Economic Development Agency (MEDA).  NALCAB helps its member organizations, such as MEDA to, develop financial capability programs.  MEDA, in turn, offers financial coaching to individuals.  According to NALCAB, the 2020 Rule impairs MEDA because, in the absence of the ATR provisions, more MEDA clients will need extra coaching to address the harm they will suffer from “multiple unaffordable loans,” and MEDA will therefore have to devote more resources to provide such coaching.  NALCAB argues that it is impaired by the 2020 Rule because the absence of the ATR provisions makes it harder for NALCAB to assist organizations seeking to develop financial capability programs since NALCAB is called upon to provide extra training and technical assistance “on strategies specific to [no-underwriting] loans.”

NALCAB also challenges CFSA’s argument that because the ATR provisions were issued when the CFPB was unconstitutionally structured, the ATR provisions were void from their inception.  It argues further that even though former Director Kraninger only ratified the 2017 Rule’s payments provisions, a new CFPB Director would not be foreclosed from ratifying the ATR provisions.

The CFPB and CFSA have filed replies in support of their motions to dismiss.  The filing of the replies closes the briefing on the motions.

In the Texas lawsuit filed by CFSA and another industry trade group seeking to invalidate the 2017 Rule’s payments provisions, briefing on the parties’ cross-motions for summary judgment closed in December 2020 and no date has been set for oral argument on the motions.

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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