12 August 2019 – Consumer watchdog groups urged the U.S. Consumer Financial Protection Bureau (CFPB) in a letter sent today to take action immediately to implement the payment provisions in its payday lending rule, whose compliance date is Aug. 19, 2019.
These provisions restrict payday and vehicle-title lenders from attempting to withdraw money from borrowers’ bank accounts after two attempts have failed, a practice that significantly harms struggling consumers. The safeguards will help consumers avoid fees for unsuccessful debit attempts that can also put their bank accounts in jeopardy. The CFPB is refusing to take steps to implement the provisions and protect consumers.
The letter was sent by Public Citizen, Americans for Financial Reform Education Fund, the Center for Responsible Lending and the National Consumer Law Center (on behalf of its low-income clients).
“The repeat hits to accounts cause borrowers to shoulder multiple non-sufficient funds, overdraft, or other fees, lead to checking account closures, and painfully hamper borrowers’ ability to manage their finances,” the letter reads. “These harms are especially acute in a market plagued by lenders making loans to borrowers who cannot afford to repay them. Such unaffordable loans would be perpetuated by the CFPB’s pending proposal to rescind other aspects of the Rule.” By limiting repeat debit attempts, the payments protections will reduce these harms.
The CFPB released its payday lending rule in 2017, after five years of research, outreach and analysis, and set Aug. 19, 2019 as the compliance date for the payment provisions and other consumer protections. But again and again, the agency’s recent leadership has undermined the rule. Under the current director, Kathleen Kraninger, the CFPB proposed rescinding the rule’s commonsense requirement that payday and vehicle-title lenders generally determine borrowers’ ability to repay their loans. In June, it issued a rule delaying the compliance date for those important ability-to-repay protections. Now, without offering any justification, it continues to obstruct the timely implementation of the rule’s payment protections.
Last fall, at the request of the CFPB and industry groups challenging the payday lending rule, the U.S. District Court for the Western District of Texas stayed the rule’s Aug. 19 compliance date. The CFPB acknowledged in a March 8 court filing that there was no basis for continuing the stay of the payment protections’ compliance date as industry plaintiffs requested at the time. However, as recently as an Aug. 2 status report, the agency has not asked the court to lift the stay on the payment protections part of the rule, as the court noted in an Aug. 6 order continuing the stay.
The letter calls on the CFPB to immediately request that the court lift the stay of the compliance date for rule’s payment provisions and to support timely implementation of these consumer protections.