Federal Judge Denies BCFP’s Request to Halt Small-Dollar Lending Rule
Mulvaney’s bureau continues to reconsider the rule finalized in 2017 under former director Cordray.
6/14/2018 12:00 PM
A federal judge June 12 denied a request submitted by Mick Mulvaney, acting director of the Bureau of Consumer Financial Protection, to stop the small-dollar lending market rule from taking effect.
The request was the latest move by Mulvaney and the bureau to address the controversial rule pushed through last fall under former BCFP Director Richard Cordray.
American Banker reports U.S. District Judge Lee Yeakel denied Mulvaney’s request in a brief two-page ruling that was devoid of an explanation.
Mulvaney announced in January that the bureau would reconsider the rule, scheduled to go into effect in August 2019.
“If the bureau wants to change the rule before it goes into effect in August 2019, it will need to start on the [notice of proposed rulemaking] as soon as possible,” Lucy Morris, a partner at Hudson Cook’s Washington office and a former deputy director at the BCFP told American Banker.
The bureau indicated in its spring rulemaking agenda that the proposed rule would be issued in February 2019.
While reconsideration of the rule continues, the bureau also faces a lawsuit from two industry groups representing payday lenders.
The Community Financial Services Association of America (CFSA) and the Consumer Service Alliance of Texas are seeking to invalidate the BCFP’s final rule on “Payday, Vehicle and Certain High-Cost Installment Loans,” based on its authority to implement such a rule, ACA International previously reported.
“The lawsuit alleges that the rule violates the Administrative Procedure Act (APA) because it exceeds the Bureau’s statutory authority and is arbitrary, capricious and unsupported by substantial evidence,” according to the news release from the CFSA.
Mulvaney is listed as a plaintiff in the complaint, however the groups note the rule they are contesting was implemented under Cordray’s tenure.
The CFPB issued the final rule in October 2017, imposing complex new requirements on payday loans, auto title loans, deposit advance products and longer-term loans with balloon payments. The previous proposed rule reportedly drew over 1 million comments, the majority of which were from opponents of the CFPB’s proposals, including a huge number from consumers who have relied upon and benefited from payday loans, ACA International previously reported.
ACA International opposed the original rule due to the bureau’s process leading up to the issuance of the proposed regulation. ACA remains hopeful that under new leadership, the bureau continues to take appropriate steps in all rulemakings to ensure that new regulations are reflective of operational realities, solve an actual as opposed to a perceived problem in the marketplace, are based on empirical evidence, and adhere to important statutory requirements.
Mulvaney is slated to serve as acting director until June 22, but will likely continue in the role until later this year as the U.S. Senate considers nominees from President Donald Trump. Names of potential nominees surfaced this week, and an announcement is expected at any time.
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