- Four consumer advocate organizations urged the Consumer Financial Protection Bureau (CFPB) in a letter Monday to implement the payment protections portion of a 2017 rule that has been tied up in court. The provision at issue would keep payday and vehicle-title lenders from repeatedly attempting to withdraw from borrowers' bank accounts despite insufficient funds.
- The compliance deadline for the rule, drafted under former President Barack Obama's appointee to lead the CFPB, Richard Cordray, was set for Aug. 19. But Judge Lee Yeakel of the U.S. District Court for the Western District of Texas ordered a stay last fall to give the CFPB time to rewrite the rule. Two industry trade groups — the Community Financial Services Association of America and Consumer Service Alliance of Texas — sued the CFPB to invalidate the rule, and President Donald Trump's appointee to lead the bureau, Mick Mulvaney, sided with the plaintiffs.
- Current CFPB chief Kathy Kraninger proposed an overhaul of the rule in February to ease underwriting restrictions, but left alone the provision limiting the number of times payday lenders could access borrowers' accounts.
In their letter, the four advocacy groups — Public Citizen, the Americans for Financial Reform Education Fund, the Center for Responsible Lending and the National Consumer Law Center — accused the CFPB of "abandoning its consumer-protection mission."
"Lenders take direct access to borrowers' accounts and attempt, again and again, to repay themselves from those accounts, even when borrowers lack funds for repayment," the advocates wrote. "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 CFPB acknowledged in a March 8 court filing the plaintiffs had "not attempted" to justify why the stay on the payment protections provision should continue, according to the groups' letter. Further, the groups wrote, the bureau's failure to ask the court to lift the stay in an Aug. 2 filing "is inexcusable."
The latest iteration of the rule, including the underwriting amendments, is set to take effect Aug. 16.