GM 17-057

CFPB Publishes Payday Lending Rule but Future of Rule is Unclear

The Consumer Financial Protection Bureau (CFPB) published the Payday Lending Rule in the FEDERAL REGISTER on November 17, 2017. The extensive set of regulations is the culmination of years of work by the CFPB. The hallmark of the rule is the requirement that lenders make a reasonable determination that a borrower has the ability to repay a loan while also meeting basic living expenses, prior to issuing a consumer loan with a repayment term of 45 days or less and longer term consumer loans with a balloon payment. The CFPB has stated that the rule applies to Indian tribes and tribally-chartered companies that lend money. The rule takes effect 21 months after publication and the CFPB expects all lenders who regularly extend credit to comply with the new requirements. The new rule would have significant implications for the tribal short-term lending industry by likely curtailing the amount, number, and frequency of loans extended to customers.

The CFPB rejected calls for the creation of an exemption for Indian tribes:

“Finally, and more narrowly, some Tribal and industry commenters have averred that the Bureau lacks authority to adopt regulations pursuant to section 1031 of the Dodd-Frank Act that apply to Indian tribes or to any of the entities to which they have delegated Tribal authority. These arguments raised on behalf of Tribal lenders have also been raised in Tribal consultations that the Bureau has held with federally recognized Indian Tribes, as discussed in part III, and in various court cases to date. They rest on what the Bureau believes is a misreading of the Act and of Federal law and precedents governing the scope of Tribal immunity, positions that the Bureau has briefed extensively to the Federal courts in some key cases testing these issues.” Citing CFPB v. Great Plains Lending, 846 F.3d 1049 (9th Cir. 2017), reh’g denied (Apr. 5, 2017) cert. pending; and Otoe-Missouria Tribe of Indians v. New York State Dep’t of Fin. Servs., 769 F.3d 105, 107 (2d Cir. 2014).

We note that since the publication of the final rule, the CFPB Director Richard Cordray resigned and attempted to appoint his deputy, Leandra English, as the acting Director pursuant to apparent authority granted in the 2010 Dodd-Frank Act. That provision, however, appears to conflict with the authority granted to the President to make acting agency head appointments under the 1998 Federal Vacancies Reform Act. President Trump instead picked Office of Management and Budget Director Mick Mulvaney as the new CFPB acting Director. On November 26, English filed a motion in the United States District Court for the District of Columbia for an emergency temporary restraining order to block Mulvaney’s appointment. On November 28, the district court denied English’s motion. We report this because Mulvaney is widely expected to attempt to block or greatly pare back the Payday Lending Rule.

Please let us know if we may provide additional information about the Consumer Financial Protection Bureau’s final Payday Lending Rule.