Community Group Files Suit Challenging CFPB Revised Payday Loan Rule
A Latino association says the CFPB “repeatedly failed to consider the harms that consumers suffer from no-underwriting lending.”
A Latino community group on Thursday filed suit in federal court, contending that the CFPB’s repeal of parts of its payday lending rule is ill-advised, ill-conceived and illegal.
The National Association for Latino Community Asset Builders filed suit in U.S. District Court for the District of Columbia, asking that the original, strict payday lending rule be restored.
In the updated rule the CFPB “repeatedly failed to consider the harms that consumers suffer from no-underwriting lending,” the group said.
In 2017, then-CFPB Director Richard Cordray, an Obama Administration appointee, issued a strict payday lending rule that would have required that payday lenders verify that a borrower had the ability to repay their loan before the loan was approved.
CFPB Director Kathy Kraninger, a Trump Administration appointee, repealed that section of the rule earlier this year. At the time she said that the agency had not provided the legal basis for such a strict rule.
The Latino group disagreed.
“The 2020 Repeal Rule revokes the CFPB’s determination that no-underwriting lending is unfair and abusive and allows the practice to continue, to the detriment of consumers,” the community group said in its suit.
The group said the Kraninger payday rule ignores critical problems, including the harm that the rule will cause consumers. The rule’s legal basis appears to be “custom-designed” to repeal the ability to repay requirement, the community group said.
The national association is a coalition of more than 120 community groups across the country.
“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 Public Citizen who is serving as the lead counsel on the case, said.
Credit union trade groups have supported Kraninger’s decision to repeal the ability-to-repay part of the rule, but have said that other sections of the payday rule, including the methods used to collect payments, should also be repealed.