CFPB and Business Groups Conclude Briefing on Payday Loan Rule Compliance Date | Ballard Spahr srl
The CFPB and the two trade groups challenging the CFPB’s 2017 rule on last salary / auto title / high-rate installment loan (2017 rule) have filed responses to the Texas federal court regarding a compliance date for the payment provisions of the 2017 rule.
The responses respond to the briefs filed by the parties Following the issuance of a court order requesting additional information “as to what would be the appropriate compliance date if the court dismissed the plaintiffs ‘motion for summary judgment and granted the defendants’ motion for summary judgment.” The briefing order provides that “[t]The court will examine the case with full knowledge of the facts upon receipt of the parties’ responses and no reply memorandum will be required. As a result, lenders now run the risk that the court will quickly rule in favor of the CFPB on its summary judgment motion and that compliance with the payment arrangements will be required as early as 30 days thereafter.
In its brief, the CFPB argued that the suspension of the compliance date should not exceed 30 days after the court ruling on the summary judgment. The trade groups, in their brief, argued that any order lifting the stay should set a date for compliance no earlier than 445 days (or, at a minimum, 286 days) from the date the court lifts the stay, reflecting the time remaining to comply when the stay was requested (or entered). As originally enacted, the 2017 rule gave lenders 21 months before compliance was required.
In his response, the CFPB argues that the suspension should be lifted because all the circumstances which initially justified the suspension have changed. First, according to the Bureau, trade groups can no longer establish a substantial case on the merits, let alone a likelihood of success, because after the United States Supreme Court ruled Seila Law and the former director Kraninger became revocable by the president without cause, she ratified the payment provisions. In addition, the unconstitutional dismissal provision did not cause any prejudice to trade groups because, although the provision prevented President Trump from firing former director Cordray, a director appointed by President Trump whom he could dismiss without cause has expressly approved the payment arrangements.
The Bureau further contends that the balance of the actions no longer justifies a suspension because the “ordinary costs [the trade groups’] members will incur to comply with payment arrangements – adjust IT and compliance systems, review customer communications and train employees… Finally, the Bureau argues that trade groups are not entitled to a long extended stay because they “now have 1,324 days and counting to make the preparations, and they have only themselves to blame if they have stood idly by.” According to the Bureau, professional groups “have long been informed that the Court could issue a judgment and lift the suspension at any time.”
In their response, trade groups argue that because a suspension is designed to preserve the status quo, any lifting of the suspension must restore the parties to the pre-suspension status quo and allow trade group members the time to implement that they were available when the stay was requested (445 days) or, failing that, when the court pronounced the stay (286 days). They also argue that the Bureau’s assertion that members of the trade group had time to comply with the payment arrangements “perversely assumes that they should have borne the very burden of implementation that the suspension was intended to avoid while the Court is ruling on the merits ”. Calling the offices ‘position “a bait and a switch,” they argue that the offices’ 30-day schedule “would put complainant members in a much worse position than before the stay, as implementation on a shortened schedule is much more expensive. “They also reiterate the argument made in their brief that if the suspension did not count the period of compliance, the Bureau must undertake new notice and comment regulations to establish new compliance. . Finally, they again argue that in any event, the court should maintain the stay pending appeal.