Consumer group calls on court to revive tougher payday loan rules

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The Consumer Financial Protection Bureau used inappropriate standards of proof and ignored the harm to borrowers when it lowered restrictions on the payday lending industry, consumer advocates said in a lawsuit.

The bureau’s removal of borrower repayment capacity standards in its rewrite of the 2017 payday lending regulations violated the administrative procedure law, the National Association of Latin American Community Asset Builders said in a complaint filed Thursday. Lawsuit asks U.S. District Court for District of Columbia to quash new rules published on July 7 and reinstate the 2017 regulation.

The repayment capacity requirements of borrowers – underwriting loans, verifying income, and “cooling off” periods between loans – have been strongly opposed by payday lenders. The CFPB removed those standards after the industry filed a lawsuit in federal court in Texas, but the bureau maintained restrictions on payday lenders ‘access to borrowers’ bank accounts.

The prosecution of consumer advocates said the bureau “used an arbitrarily truncated analysis” and did not collect data to justify removing the repayment capacity provisions from the 2017 regulations. The CFPB did not Neither received enough feedback from consumer groups and other interested parties when developing the new rules, according to the complaint.

“The CFPB rule appears to be designed only to increase lender profits, unlike the agency’s consumer financial protection mission,” said Rebecca Smullin, a lawyer for the Public Citizen Litigation Group who is leading the case, in a statement. communicated.

The agency did not respond to a request for comment.

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

Former CFPB director Obama-appointed Richard Cordray released the 2017 regulations shortly before leaving the agency. They were suspended in 2018 after the Trump administration took over.

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

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

Relief: Injunction, declaratory decision

Reply: The CFPB declined to comment on the pending litigation.

Lawyers: Rebecca Smullin and Adina H. Rosenbaum of the 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, DDC, n ° 1: 20-cv-03122, complaint 10/29/20.

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