The National Association for Latino Community Asset Builders (NALCAB) has filed its combined opposition motions from the CFPB and the Consumer Financial Services Association (CFSA) to dismiss the NALCAB lawsuit challenging the CFPB’s cancellation of the “repayment capacity” (ATR) or “mandatory subscription provisions” in its latest payday / 2017 car title / high rate installment loan rule (2017 rule). The lawsuit seeks to overturn the CFPB’s July 2020 Final Rule (2020 Rule) which eliminated the ATR provisions but left the payment provisions of the 2017 Rule in place. The CFSA intervened in the lawsuit.
When the CFPB filed its motion to dismissCFPB Acting Director Dave Uejio clarified that the motion was not intended to indicate that the “new CFPB” supports the 2020 rule. He explained in a blog post that the 2020 rule “was challenged in court and the Bureau had a legal obligation to respond to the lawsuit”, which it did by filing a brief “dealing only with the jurisdiction of the court to hear the case”. He added that “the Bureau continues to believe that repayment capacity is an important underwriting standard. To the extent that the business models of small dollar lenders continue to rely on the inability of consumers to repay, these practices cause harms that must be addressed by the CFPB. “
In its opposition to the requests for dismissal, the NALCAB responds to the arguments put forward by the CFPB and the CFSA contesting the standing of NALCAB under Article III. NALCAB argues that it has sufficiently established that it has standing to bring an action on its own behalf and on behalf of its member, Mission Economic Development Agency (MEDA). NALCAB helps its member organizations, such as MEDA, to develop financial capacity programs. MEDA, in turn, offers financial support to individuals. According to NALCAB, the 2020 Rule undermines MEDA because, in the absence of the ATR provisions, more MEDA clients will need additional support to deal with the damages they will suffer as a result of “multiple unaffordable loans“, and MEDA will therefore have to devote more resources to providing such a framework. NALCAB argues that it is hampered by the 2020 Rule because the absence of ATR provisions makes it more difficult for NALCAB to assist organizations seeking to develop financial capacity programs since NALCAB is called upon to provide training. additional and technical assistance “on strategies specific to [no-underwriting] ready. “
NALCAB also takes issue with CFSA’s argument that because the ATR provisions were issued while the CFPB was unconstitutionally structured, the ATR provisions were void since their inception. He further argues that even if the former director Kraninger only ratified the payment provisions of the 2017 rule, a new CFPB director would not be prevented from ratifying the ATR provisions.
In Texas lawsuit filed by CFSA and another industry trade group seeking to strike down payment provisions of the 2017 rule, set out on parties’ cross-petitions for summary judgment closed in December 2020 and no date has been set for oral argument on the motions.