Changes to the CFPB’s Approach to the Payday Lending Industry

CFPB  •  Small Dollar Lending/Lenders

The Trump Administration-appointed Acting Director of the Consumer Financial Protection Bureau (“CFPB”), Mick Mulvaney, recently stated in a memo to his staff that under his leadership, the CFPB would significantly change in its approach to regulation and enforcement.  The most concrete example of this thus far is his approach to the payday lending industry.

The first clear indication of the CFPB’s new direction came with Mr. Mulvaney’s announcement on January 16, 2018, that the CFPB would re-open the rulemaking process for the much debated rule on payday lending, entitled “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (“Payday Rule”).  In its announcement, the CFPB also posted a conspicuous notice which informs potential applicants for preliminary approval to become a registered information system under the Payday Rule, that they can request a waiver of the April 16, 2018 deadline.

The Payday Rule, as we previously reported, contains various provisions, including requiring that payday lenders determine whether borrowers can afford to repay the loan within 30 days.  It also contains a 30-day cooling off period for borrowers after they obtain a third loan in succession.

The second concrete step that the CFPB has taken in stepping back from regulating the industry involved current enforcement actions.  On January 18, 2018, the Bureau filed a notice of voluntary dismissal in a lawsuit against payday lenders in Kansas, Consumer Financial Protection Bureau v. Golden Valley Lending Inc. et al., No. 2:17-cv-02521.  The CFPB dismissed the case without explanation, stating only that it was continuing to investigate the transactions, and that it could not comment on an open enforcement issue.  Since the dismissal was without prejudice, the CFPB can re-file the suit if necessary.  The lawsuit alleged abusive loan practices that violated both state and federal law, and further argued the parties did not have tribal immunity.

In addition, Mr. Mulvaney closed an investigation on a payday lender, World Acceptance Corporation.  World Acceptance Corporation released a statement confirming that the CFPB had sent a letter indicating that it does not intend to recommend enforcement, and that its investigation was finished.

These events taken together are a strong signal to the lending industry and the public generally that the environment for payday lending has changed from the CFPB’s previous incarnation under former Director Cordray.  As a result, it is possible that consumer advocate groups may redirect their resources from targeting the industry itself to advocating against Mr. Mulvaney’s stated changed mission of the CFPB.  LenderLaw Watch will continue to monitor developments  as they arise.

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