District court challenges CFPB payday rule
On January 14, the United States District Court for the District of Columbia allowed two motions to dismiss a challenge to the Bureau’s 2020 final rule revoking certain underwriting provisions of the agency’s 2017 final rule covering “payday loans, vehicle title and certain high-cost installment loans” ( payday loan rule). As previously covered by InfoBytes, the final rule repeals, among other things, (i) the provision that it is unfair and abusive for a lender to make loans at high interest rates, covered short-term loans or lump-sum loans at more than term covered without reasonably determining that the consumer has the ability to repay the loans on their terms; (ii) mandatory underwriting requirements prescribed to determine repayment capacity; (iii) the “principal degression exemption” provision for certain covered short-term loans; and (iv) related definitions, reporting and record keeping requirements. The applicant (a national association of organizations serving Latin American communities) deposit lawsuit alleging that the Bureau’s 2020 Final Rule violated federal regulatory requirements and arguing that the 2020 Final Rule relied on an “unreasonable” new standard of proof and advanced statutory definitions that “seem tailor-made to repeal the repayment capacity protections” of the Payday Lending Rule. Plaintiff asked the court to set aside the repeal and order the Bureau to implement the 2017 Payday Loan Rule. Motions to dismiss for lack of standing were filed by the Bureau as well as an intervenor-defendant association.
In dismissing the action, the court determined that the plaintiff had failed to establish “concrete and demonstrable harm to its business” attributable to the impact of the 2020 Final Rule. The plaintiff argued that it had suffered harm because the 2020 final rule had made its job more difficult as member organizations needed more help and resources from the plaintiff to “help families avoid or remedy loans on unaffordable salary and titles. The court, however, held that[e]The expenditure of resources in response to the agency’s action alone is insufficient to establish a recognizable injury, as it leaves the first stage of the investigation unaddressed. Rather, “there must be a distinct discernible impairment in the organization’s ability to provide services — something that makes it more difficult for the organization to conduct its business” — an impairment, the court said, for which the plaintiff has not plausibly alleged.