Update on CFPB payday lending rule: “it ain’t over ‘till it’s over”

On June 14, the CFPB announced that its payday lending rule would become effective on March 30, 2025. However, the CFPB ignored the possibility of further litigation in CFSA v. CFPB, the case challenging the payday lending rule that has been pending since 2017.

After the U.S. Supreme Court’s decision in CFSA v. CFPB which held that the CFPB’s funding mechanism does not violate the Appropriations Clause of the U.S. Constitution, it did not take long for the plaintiff trade groups to indicate that they were not yet ready to throw in the towel. On May 16, the trade groups wrote a letter to the Fifth Circuit stating their intention to seek a rehearing with respect to their three claims which were rejected by the Fifth Circuit panel ( the “Alternative Claims”). (The Fifth Circuit rejected these claims but ruled that the CFPB’s funding mechanism was unconstitutional.)

Although the CFPB submitted a letter to the Fifth Circuit in response in which it asserted that the time for filing a petition for rehearing had expired long ago, the Fifth Circuit disagreed. On June 14, on remand from the Supreme Court, the Fifth Circuit issued its judgment affirming in all respects the judgment of the district court and reinstating its judgment in favor of the CFPB on the Alternative Claims.

The Fifth Circuit also stated:

The judgment or mandate of this Court shall issue 7 days after the time to file a petition for rehearing expires, or 7 days after entry of an order denying a timely petition for panel rehearing, petition for rehearing en banc, or motion for stay of mandate, whichever is later. See Fed. R. App. P. 41(b). The Court may shorten or extend the time by order. See 5th Cir. R. 41 I.O.P.

The trade groups will have 45 days from the entry of the Fifth Circuit’s judgment on June 14 to file their petition for rehearing unless the time is extended or shortened by the Court. As things currently stand, the petition for rehearing will be due no later than July 29.

As a reminder, the payday lending rule contains the following two key provisions:·

• Lenders are prohibited from attempting to withdraw payment for a covered loan from a borrower’s account after two consecutive attempts have failed due to lack of sufficient funds, unless the borrower specifically provides new authorization to do so; and
• Lenders must give consumers certain notices, such as advance notice before attempting to withdraw a payment for the first time and notice of the consumer’s rights when two consecutive payment attempts fail.

The Alternative Claims are (1) the payday lending rule’s promulgation violated the Administrative Procedure Act; (2) the rule was promulgated by a Director unconstitutionally insulated from presidential removal; and (3) the CFPB’s UDAAP rulemaking authority violates the Constitution’s separation of powers by running afoul of the nondelegation doctrine.

As Yogi Berra often said: “It ain’t over ‘till it’s over!”