A&B ABstract: Three recent actions by the Consumer Financial Protection Bureau (“CFPB”), on consecutive days, highlights inconsistencies in the CFPB’s current approach to payday lending.
On Monday, March 22, 2021, the CFPB filed in D.C. federal district court a memorandum in support of its motion to dismiss a lawsuit filed last year by National Association for Latino Community Asset Builders (NALCAB). The lawsuit challenged the CFPB’s 2020 final rule that rescinded the mandatory underwriting provisions of its 2017 payday lending rule. The CFPB’s memorandum persuasively argues that NALCAB lacks standing to bring its challenge because (among other things) its claimed injuries are purely speculative, and therefore the court lacks subject-matter jurisdiction to hear the case.
One day later, on Tuesday, March 23, 2021, Acting CFPB Director Uejio released a blog post stating that notwithstanding its motion to dismiss NALCAB’s amended complaint, the CFPB “continues to believe that ability to repay is an important underwriting standard.” He further alleged that payday lenders’ business model “is dependent on consumers’ inability to repay their loans” and “those practices cause harm that must be addressed by the CFPB,” including through rulemaking if appropriate.
Two days later, on Wednesday, March 24, 2021, the CFPB released its 2020 Consumer Response Annual Report. The report noted that the CFPB received approximately 542,300 consumer complaints in 2020, an increase of more than 50% over the number of complaints it received in 2019. Acting Director Uejio said in his introduction to the report: “The global pandemic was perhaps the most disruptive long-term event we will see in our lifetimes. Not surprisingly, the shockwaves it sent across the planet were felt deeply in the consumer financial marketplace.”
Notably, however, payday loan complaint volume actually decreased by 24% in 2020. The CFPB received only 1,600 payday loan complaints in 2020, or just 0.3% of all complaints received. Of these, about 600 complaint were routed to other agencies or found to be incomplete, so only about 1,000 complaints were actually sent to companies for review and response. And of these, 83% were closed with an explanation provided by the company, suggesting that complainants may have been simply mistaken about certain facts relating to their payday loan, while only 1% (i.e., 10 complaints) resulted in monetary relief provided to consumers.
In a February 10, 2021 blog post, Acting Director Uejio pledged that consumer complaints and other consumer input would be treated as crucial data that drives CFPB policymaking. Accordingly, the CFPB may be expected to consider whether the paucity of payday lending complaints can be reconciled with its conviction that the payday lending model depends upon causing consumer harm, and whether a discretionary rulemaking is appropriate in light of competing priorities.