In 2017, the Consumer Financial Protection Bureau promulgated the Payday Lending Rule, aimed at high-interest consumer loans that are typically due in full within a short term, sometimes as soon as the borrower’s next paycheck. The rule has been hotly contested by payday lenders from the start. In 2020, the provisions of the rule requiring lenders to determine upfront whether a consumer had the ability to repay a loan were rescinded. What remains of the rule are “payment provisions,” which are meant to limit overdraft or insufficient fund fees charged to borrowers when lenders repeatedly attempt to collect payment from accounts with too little or no money. The payment provisions (1) require lenders to provide borrowers with written notice before the first attempt to debit the borrower’s account and (2) prohibit lenders from attempting to debit a borrower’s account after two straight unsuccessful attempts, unless the borrower provides a new and specific authorization.
The payday lending industry, unsatisfied by the pared down rule, continued to challenge the rule in court on several grounds. However, as reported in The Fitch Briefs last year, the U.S. Supreme Court handed the Bureau a win in May 2024 that paved the way for the rule to move forward. Soon thereafter, the Bureau announced that the rule would go into effect on March 30, 2025.
Most recently, though, the status of the long-delayed rule took another turn. Just two days before the rule was to go into effect, the Bureau, under new leadership, announced that it would “not prioritize enforcement or supervision actions” regarding any penalties or fines associated with the rule, opting instead to focus its resources elsewhere. The Bureau further announced that it is contemplating issuing a notice of proposed rulemaking to narrow the scope of the rule.
It remains to be seen what, if anything, will become of rule under the Bureau’s new leadership. But for now, payday lenders have been given a bit of a reprieve.