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A Brief History of the Consumer Financial Protection Bureau Payday Lending Rule

By: Alexander N. Ghantous

LendingBetween 2013 and 2016, the Consumer Financial Protection Bureau (CFPB) issued no fewer than six white papers or reports relating to payday loan protections.[1]  On the date of the last report, June 2, 2016, the CFPB issued a proposed rule[2], and on October 5, 2017, a final rule issued that addresses payday loans, auto title loans, and other loans that require the entire loan balance, or the majority of a loan balance, be repaid at once.[3]  The rule’s stated objective was to eliminate “payday debt traps” by, among other things, addressing underwriting through establishing “ability-to-repay” protections that vary by loan type.[4] 

Under the final rule, for payday loans, auto title loans, and other loans comprised of lengthier terms and balloon payments, the CFPB would require a “‘full-payment test” to establish that borrowers can afford to pay back the loan and also limits the quantity of loans taken “in quick succession” to only three.[5]  The rule also lays out two instances when the “full-payment test” is not required:  (1) borrowing up to $500 when the loan balance can be repaid at a more gradual pace; and (2) taking loans that are less risky, such as personal loans taken in smaller amounts.[6]  The rule would also establish a “debit attempt cutoff,” which requires lenders to obtain renewed authorization from a borrower after two consecutive unsuccessful debits on a borrower’s account.[7]  The rule was scheduled to become effective one year and 9 months after being published by the Federal Register, which was last month[8] (the rule was published on November 17, 2017[9]).     

However, on February 6, 2019,  the CFPB announced that it was proposing to issue a new rule to rescind the underwriting provisions of the prior rule, namely, the requirements for payday loans, auto title loans, and other loans comprised of lengthier terms and balloon payments.[10]  According to the CFPB’s preliminary findings, overturning the requirements would make credit more readily available to consumers.[11]  That same day, the CFPB also proposed pushing the rule’s compliance date from August 19, 2019 to November 19, 2020.[12]

On June 6, 2019, the CFPB issued a final rule to delay the compliance date for the mandatory underwriting provisions of the 2017 final rule to November 19, 2020 in order to provide additional time to permit an orderly conclusion to its separate rulemaking process to reconsider the mandatory underwriting provisions.[13]  Note that the payment provisions of the final rule, which address withdrawing payments from accounts, have not been delayed by rulemaking, and the CFPB has made no move to rescind those provisions.[14]  However, the CFPB also has not opposed the compliance date for those provisions being stayed through at least December 6, 2019, in connection with a lawsuit in the Western District of Texas that challenges the rulemaking.[15] 

Thus, the earliest that any part of the rule will go into effect is December 2019.


[1] Consumer Fin. Prot. Bureau, (last visited Sept. 18, 2019).

[2] Consumer Fin. Prot. Bureau, (June 2, 2016). 

[3] Consumer Fin. Prot. Bureau, (Oct. 5, 2017).

[4] Id

[5] Id

[6] Id

[7] Id

[8] Id

[9] Payday, Vehicle Title, and Certain High-Cost Installment Loans, 82 FR 54472-01

[10] Consumer Fin. Prot. Bureau, (Feb. 6, 2019).

[11] Id

[12] Id

[13] Consumer Fin. Prot. Bureau, (last visited Sept. 18, 2019).

[14] Consumer Fin. Prot. Bureau, (Feb. 6, 2019).

[15] Cmty. Fin. Servs. Ass’n of Am., Ltd. v. Consumer Fin. Prot. Bureau, No. 1:18-cv-00295-LY (Tex. Dist. Aug. 6, 2019) (order staying litigation and compliance date).