Penalties or fines related to the payment withdrawal and payment disclosure provisions of the agency ‘s 2017 payday rule will not be an enforcement or supervision priority of the Consumer Financial Protection Bureau (CFPB) beginning March 30, when the rule is set to take effect.
The CFPB also said it is “contemplating issuing a notice of proposed rulemaking to narrow the scope of the rule.”
The CFPB was sued over the 2017 final rule by the Consumer Financial Services Association, which represents payday lenders, and the group lost on appeal in 2022. The group’s remaining challenge, which targeted the CFPB’s funding mechanism, was rejected by the U.S. Supreme Court last year.
The bureau, in issuing its final rule, said the rule includes penalty-fee prevention measures that apply to short-term loans, balloon-payment loans, and any loan with an annual percentage rate over 36% that includes authorization for the lender to access the borrower’s checking or prepaid account.
The provisions will not, it said, apply to banks or credit unions making loans to their own customers (or members) “if those loans cannot generate overdraft or insufficient funds fees.”
Among the provisions is a requirement to provide written notice before the first attempt to debit the consumer’s account to collect payment for any loan covered by the rule. Another provides that after two straight unsuccessful attempts, the lender is prohibited from debiting the account again unless the lender gets a new and specific authorization from the borrower to again debit the account. (An unsuccessful attempt includes a debit or withdrawal that is returned unpaid or is declined due to insufficient funds in the borrower’s account.)
In a release Friday, the CFPB said that “with respect to the Payday, Vehicle Title, and Certain High-Cost Installment Loans Regulation, it will not prioritize enforcement or supervision actions with regard to any penalties or fines associated with the Payment Withdrawal provisions and the Payment Disclosure provisions once they become operative on March 30, 2025. The Bureau will instead keep its enforcement and supervision resources focused on pressing threats to consumers, particularly servicemen and veterans.”