CFPB Shifts Direction—Implications of Proposed Rescission of Portions of Payday Lending Regulation: CFPB Preliminarily Concludes That the 2017 Final Rule Lacked a Sufficiently Robust Factual Basis Given the Impact on the Industry, and Preliminarily Rejects Prior Legal Analysis of Unfair and Abusive Practices Supporting Rule Provisions

Sullivan & Cromwell LLP - May 1, 2019
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The Consumer Financial Protection Bureau (“CFPB”) is currently seeking comments on a notice of proposed rulemaking that would rescind its 2017 Payday Lending Rule ability-to-repay provisions (the so-called “Mandatory Underwriting Provisions”). The CFPB preliminarily disavows the reliance on certain studies used to support its 2017 Payday Lending Rule, and preliminarily concludes that the legal analyses finding unfair and abusive practices were faulty, even if the cited studies had been more robust. The CFPB expresses concern, moreover, that “the [mandatory underwriting] provisions would reduce access to credit and competition in states that have determined that it is in their residents’ interests to be able to use such products, subject to state-law limitations.” The CFPB’s release also suggests that the CFPB is not considering replacing the mandatory underwriting provisions with other remedies, such as enhanced disclosures. The Notice of Proposed Rulemaking was originally issued on February 6, 2019, and comments are due May 15, 2019. The Proposed Rescission may signal a CFPB more focused on plain-vanilla deceptive practices, instead of on the more far reaching and potentially intrusive unfairness and abusiveness doctrines.