The Consumer Financial Protection Bureau’s payday lending rule, created by former CFPB Director Richard Cordray, will go into effect in August 2019 as originally intended.
That was the decision of a Texas court Tuesday, striking a blow to acting CFPB Director Mick Mulvaney’s attempt to delay implementation of the rule in a broader effort by President Donald Trump’s appointee to significantly revise or fully repeal the rule. Finalized last October, the rule requires lenders to determine a borrower’s ability to repay a short-term loan of 45 days or less.
The decision Tuesday received a warm reception from consumer watchdog groups.
“The consumer bureau, under the direction of Mick Mulvaney, should never have made this transparent attempt to destroy an important consumer protection around payday lending,” a group called Stop the Debt Trap that is composed of over 750 organizations from across the country said in a statement. “Nonetheless, we’re heartened that a federal judge rejected Mulvaney’s attempt, in partnership with predatory payday lenders, to evade the requirements of the Administrative Procedures Act.”
Mulvaney announced in January that the CFPB would engage in a rule-making process to reconsider or repeal the rule, garnering praise from groups such as the Consumer Bankers Association, which argue that the new regulation would hamper banks from offering affordable and popular small-dollar credit options that millions of Americans need.
The U.S. House Financial Services Committee approved legislation in late March that would change the payday lending rule, and on May 31, Mulvaney filed the motion to delay the rule, which was eventually rejected. Although a win for consumer watchdogs, the CFPB and Mulvaney are still expected to pursue other avenues to delay and potentially change the rule.