On Tuesday, the small-dollar lending industry received a favorable ruling in Community Financial Services Association of America v. CFPB. A Texas federal court reversed course by staying the August 19, 2019, compliance date for the Bureau of Consumer Financial Protection’s (BCFP) rule regarding “Payday, Vehicle Title, and Certain High-Costs Installment Loans.” The court also continued a stay on the underling litigation previously issued on June 12, 2018. This latest ruling was prompted by the BCFP’s October 26, 2018, announcement that it would revisit key portions of the rule — specifically, the ability-to-repay provisions and address the compliance date of the rule as early as January 2019. Judge Lee Yeakel had previously denied the parties’ request to stay the rule’s compliance date in June. At that time, the industry trade groups Plaintiff Community Financial Services Association of America, Ltd. and the Consumer Services Alliance of Texas were hoping to stay the compliance date for 455 days after any final judgment in the case.
Unfortunately, the court failed to specify how long the stay on the rule’s compliance date will remain in place, only finding it was “pending further order of the court.” Our best guess is that the court will keep the stay in place at least through March 1, 2019, when the parties’ next joint status report is due. By then, the BCFP’s new proposal should be issued. What is unclear is whether any parts of the existing rule, e.g., the payment provisions, will still be tied to the August 19, 2019, compliance date when the stay is lifted. The BCFP has indicated that it will address the compliance date as part of the new proposal, but that may be a hard sell to consumer advocate groups. It is certainly possible that the August 19, 2019, compliance date will still be in play for some parts of the rule. For that reason, lenders should begin focusing their attention on the payment provisions until further guidance is issued from the court or BCFP.