Court Upholds Payday Rule; Enforcement to Begin June 22

The Consumer Financial Protection Bureau will begin enforcing the payments section of its payday loan rule on June 13, 2022, agency Acting Director Dave Uejio said Tuesday.

Uejio explained the payments section. “These provisions will prohibit lenders from continuing to attempt to withdraw payment from borrowers’ accounts after two attempts have failed, which will protect borrowers from being hit with multiple fees for returned payments or insufficient funds and reduce the risk that consumers’ accounts will be closed.”

Uejio’s comments came after U.S. District Judge Lee Yeakel ruled that the agency did not exceed its authority in issuing the controversial rule.

The Consumer Financial Services Association of America, the trade group representing payday lenders, had filed suit in U.S District Court for the Western District of Texas challenging the rule.

In its suit, the payday lending trade association cited a Supreme Court ruling that found that the CFPB’s structure was unconstitutional because the director could only be removed for cause. That ruling allowed the director to be removed by the president at will. The trade group argued that because the rule had been issued under an unconstitutionally structured agency, the rule was void.        

However, Yeakel noted that following the Supreme Court ruling, then-CFPB Director Kathleen Kraninger reaffirmed the rule.

The judge did extend the effective date of the rule.

“Under the court’s order, compliance with the rule will become mandatory on June 13, 2022,” Uejio said. “The CFPB expects lenders to follow the requirements of the payment provisions, consistent with the court’s order.”

During the Obama Administration, then-Director Richard Cordray issued a strict payday loan rule that, among other things, required that borrowers be able to demonstrate their ability to repay a loan before it is approved.

The Trump Administration rescinded that portion of the rule but kept the payment section that was being challenged in this lawsuit. The Trump Administration also exempted certain loans modeled after the National Credit Union Administration’s Payday Loan Alternative model from the rule.

The Biden Administration has held out the possibility that it might reissue the section of the rule that required borrowers show they are able to repay the loan.


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