Public Citizen and the Center for Responsible Lending sued the Consumer Financial Protection Bureau on Thursday to overturn its 2020 payday lending rule, alleging the bureau violated the Administrative Procedure Act and the Dodd-Frank Act.
The two consumer groups alleged in a lawsuit filed in U.S. District Court for the District of Columbia that the rule — which itself repealed most of the bureau’s 2017 payday rule — was not supported by evidence.
The groups sued on behalf of the National Association for Latino Community Asset Builders, a nonprofit group of community and economic development organizations, saying the rule was based on “an invented evidentiary standard,” and failed to consider consumer protections mandated by Dodd-Frank.
“This rule is a slap in the face to consumers and is particularly ill-timed when so many people are facing financial distress due to the pandemic,” said Rebecca Smullin, the Public Citizen attorney serving as lead counsel on the case. “The CFPB’s rule appears to be crafted solely to boost lenders’ profits, contrary to the consumer financial protection mission of the agency.”
In July, CFPB Director Kathy Kraninger
Consumer groups were expected to sue to repeal the payday rule arguing that the bureau spent five years developing consumer safeguards that were reversed by the Trump administration. The Administrative Procedure Act requires rigorous research and analysis, not just a policy disagreement, to change existing rules.
“Reversing course, without any rational basis for doing so, as the COVID-19 pandemic continues to ravage the economy, will only push struggling families closer to the brink,” said Will Corbett, litigation director at the Center for Responsible Lending.
