WASHINGTON–Two trade groups representing payday lenders have filed a motion for preliminary injunction to enjoin the Bureau of Consumer Financial Protection from enforcing its payday lending rule.
The same groups had earlier attempted to get a stay of the Aug. 19, 2019 compliance date, but were rejected by the courts.
The motion was filed by the Community Financial Services Association of America and the Consumer Service Alliance of Texas.
While the Texas federal district court had earlier denied a stay of the compliance date, it did grant a request for a stay of an April 2018 lawsuit they had filed challenging the BCFP’s payday lending rule, according to the National Law Review. “Accordingly, concurrently with filing the preliminary injunction motion, the trade groups also filed an unopposed motion to lift the stay of litigation,” the National Law Review said.
What’s At Issue
At issue is a BCFP announcement that it intends to engage in a rulemaking process to reconsider the Payday Rule pursuant to the Administrative Procedure Act (APA), and in its Spring 2018 rulemaking agenda indicates it expects to issue a Notice of Proposed Rulemaking to revisit the Payday Rule in February 2019, the National Law Review noted.
“In their Unopposed Motion to Lift the Stay of Litigation, the trade groups state that the BCFPB ‘has noted that it does not expect that rulemaking to be complete before the compliance date. Moreover, it is impossible to know what the result of that rulemaking will be,’” according to the National Law Review. “They assert that because the compliance date has not been stayed, they ‘now have no choice but to pursue a preliminary injunction’ to avoid the irreparable injuries the trade groups’ members will suffer in preparing for compliance with the Payday Rule’s requirements. They indicate that they have conferred with the BCFP about the motion and that the BCFP has stated that it does not oppose the motion provided the trade groups agree that the BCFP does not have to file an answer in the case pending further court order.”
The trade groups agreed to the BCFP’s request, the Law Review added.
Challenge to Constitutionality
In the preliminary injunction motion, the trade groups are arguing the payday rule was adopted by an unconstitutionally structured agency and that the lending practices prohibited by the payday rule do not meet the CFPA’s standard for an act or practice to be deemed “unfair” because extending payday loans without satisfying the Bureau’s “ability to repay” determination is not likely to cause “substantial injury” to consumers, any injury caused by the prohibited practices is “reasonably avoidable,” and any injury that is not reasonably avoidable is “outweighed by countervailing benefits,” the National Law Review added.
The National Law Review further pointed out that if the district court were to deny the preliminary injunction motion, the trade groups would have the right to appeal the denial to the Fifth circuit, which already has before it another case which raises the same constitutional challenge to the BCFP that the trade groups have raised.