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CFPB Acting Director says he expects lenders to follow recent payday lending court ruling
The U.S. District Court for the Western District of Texas upheld the Payment Provisions in the CFPB’s 2017 payday lending rule and marked the effective date as June 13, 2022. In response, CFPB Acting Director Dave Uejio Tuesday commented that he was “pleased the court reaffirmed our ability to protect borrowers from unfair and abusive payment practices in the payday lending and other markets covered by the rule." He went on to say that “the CFPB expects lenders to follow the requirements of the payment provisions, consistent with the court’s order.”
The CFPB’s payday lending rule, first promulgated in 2017, originally contained two major components — underwriting provisions and payment provisions. The underwriting provisions required payday lenders to determine that a consumer will have the ability to repay the loans according to the terms of the covered short- or long-term balloon-payment loans.
The payment provisions upheld by the court were put in place to prevent the cycle of borrowers taking on new debt to pay back old debt. Of note, two industry trade groups filed suit in 2018, challenging both the underwriting provisions and the payment provisions.
NAFCU will remain in close contact with the bureau on this topic and continue to inform credit unions of changes that may impact their abilities to offer these types of loans.