A Texas court ruled on Tuesday (June 12) against delaying the compliance date for the Consumer Financial Protection Bureau’s rule on payday loans.
A lawsuit had aimed to block the new federal rules that would limit these short-term loans that some critics say can force people into serious debt.
The restrictions are scheduled to take effect next year, but lenders — along with the CFPB — sued to have that deadline delayed while the agency takes a closer look at the regulations. In fact, earlier this year CFPB’s acting director Mick Mulvaney revealed that the agency was going to “reconsider” rules regarding payday loans.
“The bureau intends to engage in a rule making process so that the bureau may reconsider the payday rule,” he said in a statement.
In October, former CFPB head Richard Cordray finalized the rule that would require lenders to conduct background checks showing that borrowers can afford the loans and to limit the number of loans made to a single borrower.
It isn’t a surprise that the rule received pushback from payday lenders, which allege that it prohibits them from issuing almost all of the loans they currently grant to consumers.
In a joint motion filed late last week in federal court in Austin, TX, Mulvaney, the Community Financial Services Association of America and the Consumer Service Alliance of Texas asked a judge to delay the new regulations from going into effect.
“There is no way to know whether plaintiffs’ members will ultimately need to comply with the payday rule, a modified payday rule, or no rule at all,” the agency and the trade group said, according to Credit Union Times.
They asked that all proceedings in the lawsuit be placed on hold. And if the lawsuit is revived, implementation of the rule should be delayed until 445 days after the final ruling.
But the U.S. District Court for the Western District of Texas ruled against the request — a move supported by the Stop the Debt Trap campaign, which is made up of more than 750 organizations from across the country.
“The consumer bureau, under the direction of Mick Mulvaney, should never have made this transparent attempt to destroy an important consumer protection around payday lending. Nonetheless, we’re heartened that a federal judge rejected Mulvaney’s attempt, in partnership with predatory payday lenders, to evade the requirements of the Administrative Procedures Act,” the group said in a statement.