A federal judge late last week ordered a stay on the August 2019 compliance date tied to the “payday lending rule” mandated roughly two years ago by the Consumer Financial Protection Bureau (CFPB).
As reported late last week across outlets such as American Banker, the rule had been drafted under the tenure of Richard Cordray, who had served as the previous director. The new Director Kathleen Kraninger has proposed eliminating one of the components of the rule, which put in place new underwriting requirements for lenders (such as verifying borrowers’ ability to repay the payday loans). The rule also had another component, focused on how often a lender can try to debit payments from a customer’s bank account.
The ruling, per U.S. District Judge Lee Yeakel, means the stay (which has been in place since November), well, stays, resulting in the delay of the rule’s implementation. The judge wrote in his March 19 ruling that he had not received a request to lift the stay.
The Kraninger-proposed rollback of the aforementioned underwriting requirements came last month, and several trade groups, such as the Community Financial Services Association of America, had asked Judge Yeakel to delay compliance dates until the underwriting rollback had been completed. The CFPB had asked the court to wait until a separate case had been decided. That case, in which a payday lender has challenged the CFPB’s very constitutionality, is still with the Court of Appeals for the Fifth Circuit.
Separately, but also germane to the CFPB, Kraninger said late last week that she would lengthen the terms of members of the Consumer Advisory Board and three other committees that advise the Bureau from one year to two. In addition, noted The Washington Post, half of the committee’s existing members can continue serving, and the number of in-person board meetings is being boosted from two to three annual meetings.
Beyond the CFPB, and at the state level in Illinois, a state Senate committee last week voted to approve legislation that would keep state banking regulators from punishing financial institutions, including banks and credit unions, for doing business with medical marijuana enterprises. Those firms, noted The Chicago Sun Times, would still be subject to federal laws (and possible prosecution under those laws).
“I would say this is kind of the grey area we’re in right now,” Jerry Peck of the Community Bankers Association of Illinois told the Senate Financial Institutions Committee, as reported by the Times. “This is still illegal federally.” The bill, known as Senate Bill 2023, is co-sponsored by Senator Toi Hutchinson and Michael Frerichs, state treasurer. Frerichs testified to the Committee that “there haven’t been wholesale raids of banks doing business with legal entities in their states, but these people are conservative by nature. They’re worried that could happen, and what that would mean for the overall concerns of their banks.” He added that “some have found a financial institution – a bank or credit union – that will accept deposits, allow them to write checks, but some have not, and they’re operating out of cash, putting all their money into safes and handling payroll with duffel bags full of cash, which we think is dangerous. That’s the problem this legislation is looking to solve.”
Moving down under, in Australia, Reuters reported the country’s new budget has earmarked an additional $550 million (in Australian dollars) to enhance regulatory efforts focused on the financial services sector. Treasurer Josh Frydenberg said over the weekend that the funds will be allocated with $400 million Australian dollars slated for the Australian Securities and Investments Commission, with the remaining tally to be given to the Australian Prudential Regulation Authority over the next four years.