A Bid to Delay Implementation of the Payday Rule Ends in a Judicial Cul-de-sac

Late last month, the CFPB took the extraordinary step of joining two trade groups in requesting a stay of a case challenging the bureau’s final payday/auto title/high-rate installment loan rule (“Payday Rule”) pending the CFPB’s reconsideration of the rule promulgated under the prior administration. Significantly, the joint motion also seeks a stay of the Payday Rule’s compliance date. The CFPB’s decision to join the plaintiff in requesting the stay of the rule is a firm indication of the bureau’s altered priorities under Director Mick Mulvaney. Indeed, the joint motion goes so far as to state that the CFPB’s rulemaking “may result in repeal or revision of the Payday Rule and thereby moot or otherwise resolve this litigation or require amendments to Plaintiffs’ complaint.” On this basis, the CFPB and the trade groups asked the federal court in Texas to stay the compliance date until 445 days from the date of final judgment in the litigation.

In response, several consumer advocacy groups filed amicus memorandum opposing the joint request for a stay. These groups argue that the CFPB’s decision to join the plaintiffs in seeking to stay the case and the Payday Rule compliance date deprive the court of the “benefit of adversarial briefing.” The consumer groups also argue that the CFPB lacks authority under 5 U.S.C. § 705 to delay implementation of the Payday Rule because Section 705 can only “stay agency action for the purpose of maintaining the status quo during judicial review.” The consumer groups argue that the CFPB is not seeking to maintain the status quo to protect against litigation uncertainties but rather to address uncertainties created by its reconsideration of its own rule. The consumer groups argue that, in fact, “the parties are not litigating and have no intention to do so,” and that application of Section 705 is therefore improper. The plaintiffs in the case filed a reply to the oppositions on June 11.

On June 12, 2018, the court entered an order staying the litigation and relieving the CFPB of the obligation to file an answer. Importantly, however, the order denied the request to stay the Payday Rule compliance date. This leaves the industry in essentially the same position that it was before the suit was filed. It is still possible that Director Mulvaney could propose a change to the rule extending the compliance date. Until then, impacted entities must continue to prepare for the August 2019 compliance date.