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Consumer Group Asks Court to Revive Tougher Payday Lending Rules

Oct. 29, 2020, 9:23 PM

The Consumer Financial Protection Bureau used improper evidentiary standards and disregarded harm to borrowers when it scaled back restrictions on the payday lending industry, consumer advocates said in a lawsuit.

The bureau’s removal of borrower ability-to-repay standards during its rewrite of 2017 payday lending regulations violated the Administrative Procedure Act, the National Association for Latino Community Asset Builders said in a complaint filed Thursday. The suit asks the U.S. District Court for the District of Columbia to nullify new rules issued July 7 and to reinstate the 2017 regulations.

The borrower ability-to-repay requirements—loan underwriting, income verification, and “cooling-off” periods between loans—were strongly opposed by payday lenders. The CFPB removed those standards after the industry sued in Texas federal court, but the bureau kept restrictions on payday lender access to borrowers’ bank accounts.

The suit from consumer advocates said the bureau “used an arbitrarily truncated analysis” and didn’t collect data to justify removing the ability-to-repay provisions from the 2017 regulations. The CFPB also didn’t get sufficient input from consumer groups and other interested parties when crafting the new rules, the complaint said.

“The CFPB’s rule appears to be crafted solely to boost lenders’ profits, contrary to the consumer financial protection mission of the agency,” Rebecca Smullin, an attorney with the Public Citizen Litigation Group leading the case, said in a statement.

The agency didn’t respond to a request for comment.

Consumer advocates said that the triple-digit interest rates, sometimes as high as 400%, and other features of payday loans can ensnare people in debt traps. They have been pushing for restrictions on the loans for decades.

Former CFPB Director Richard Cordray, an Obama-era appointee, issued the 2017 regulations shortly before leaving the agency. They were put on hold in 2018 after the Trump administration took over leadership.

The Trump-era rules also face opposition from the payday lending industry. The industry continues to oppose the payment restrictions that were left in place from the 2017 regulations and has asked a Texas federal court to stay the rules issued in July.

Causes of Action: Violations of the Administrative Procedure Act and the Dodd-Frank Act.

Relief: Injunctive, declaratory relief

Response: The CFPB declined to comment on pending litigation.

Attorneys: Rebecca Smullin and Adina H. Rosenbaum of Public Citizen Litigation Group; William R. Corbett, Yvette Garcia Missri and Rebecca Borné of the Center for Responsible Lending

The case is National Association for Latino Community Asset Builders v. Consumer Financial Protection Bureau, D.D.C., No. 1:20-cv-03122, complaint 10/29/20.

To contact the reporter on this story: Evan Weinberger in New York at

To contact the editors responsible for this story: Michael Ferullo at; Roger Yu at