June 13, 2018

Court stays lawsuit challenging CFPB payday loan rule but not compliance date

Ballard Spahr LLP--Alan S. Kaplinsky

A Texas federal court has granted the stay of the lawsuit filed by two trade groups challenging the CFPB’s final payday/auto title/high-rate installment loan rule (Payday Rule) requested in a joint motion filed by the trade groups and the CFPB but has denied the stay of the Payday Rule’s August 19, 2019 compliance date that was also requested in the joint motion.

The court did not provide the basis for its decision in the order ruling on the joint motion.  However, the court also granted the motion filed by four consumer advocacy groups seeking leave to file an amicus memorandum opposing the joint motion.

The joint motion had sought the stay of the compliance date pursuant to Section 10(d) of the Administrative Procedure Act (APA), 5 U.S.C. Section 705.  In their amicus brief, the advocacy groups argued that in addition to the parties’ failure to satisfy the four-part test used to assess requests for Section 705 stays, a stay of the compliance date while also staying the litigation was inconsistent with the purpose of Section 705 to stay agency action in order to maintain the status quo during judicial review.  According to the advocacy groups, the CFPB and trade groups were not seeking to maintain the status quo to protect against litigation uncertainties but rather to address uncertainties created by the CFPB’s decision to engage in rulemaking to reconsider the Payday Rule.  They described the joint motion as an attempt to “effect an end-run around the [APA’s notice-and-comment rulemaking procedures].”  (The trade groups filed a response in which they disputed the arguments made by the advocacy groups.)

In light of the court’s ruling on the joint motion, we hope that the CFPB will move quickly to stay the compliance date pursuant to the APA’s notice-and-comment procedures.


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