On June 10, the Consumer Financial Protection Bureau (CFPB) issued a final rule extending the compliance deadline for key provisions of its controversial Payday Lending Rule. The new compliance deadline is November 19, 2020, but the CFPB – despite sharp criticism from consumer advocates and leading Democrats – is expected to rescind the most controversial provisions of its Payday Lending Rule before that deadline.  

The deadline extension applies to the Payday Lending Rule’s mandatory underwriting provisions, which deem it an unfair and abusive practice for a lender to make a “covered loan” without first determining the borrower’s ability to repay the loan according to its terms. 

While praised by many consumer advocates, the mandatory underwriting provisions have been widely criticized by small-dollar lenders, who argue that they would, if implemented, effectively eliminate critical, stop-gap credit for low-income borrowers.  

Embracing the concerns voiced by small-dollar lenders, the CFPB has initiated a separate rulemaking process to consider whether it should rescind the Payday Lending Rule’s mandatory underwriting provisions. The proposal supporting that rulemaking effort suggests there was insufficient evidence and legal support for the mandatory underwriting provisions as issued in 2017, and also notes the CFPB’s “preliminary finding” that rescinding the provisions “would increase consumer access to credit.” 

In announcing the extension of the compliance deadline, the CFPB said that requiring compliance “would risk undermining effective reconsideration” of the mandatory underwriting provisions “by imposing potentially market-altering effects, some of which may be irreversible if the Bureau required compliance with the mandatory underwriting provisions and then later rescinded them.”  

The Payday Lending Rule was an Obama-Era initiative, shepherded through the CFPB in 2016 and 2017 by then-Director Richard Cordray. 

The CFPB’s ongoing effort to rescind the Payday Lending Rule’s mandatory underwriting provisions has been sharply criticized by consumer advocates and leading Democrats, including Senator Elizabeth Warren, who has said that the effort threatens “crucial protections for borrowers and makes it clear that the CFPB is not doing its job to protect consumers.” 

The CFPB’s final rule extending the deadline for compliance with the Payday Lending Rule’s mandatory underwriting provisions is available here.