“Although there may be other constitutional checks on Congress’ authority to create and fund an administrative agency, specifying the source and purpose is all the control the Appropriations Clause requires.” With these words, seven members of the Supreme Court upheld the constitutionality of the Consumer Financial Protection Bureau’s funding mechanism and forestalled the possibility that
Payday Lending
Supreme Court to Decide CFPB’s Validity
Less than three years after the U.S. Supreme Court reviewed the CFPB’s appointment structure, the bureau again finds itself before the Court in what could prove the most consequential case for the financial services industry in years. Four months ago, the Fifth Circuit Court of Appeals issued a decision in Community Financial Services Association of…
Fifth Circuit Court of Appeals Invalidates Small-Dollar Rule, Throws the Future of the CFPB Into Question
On October 19, 2022, the Fifth Circuit Court of Appeals issued its opinion in Community Financial Services Association of America, et al. v. CFPB (CFSA v. CFPB) invalidating the CFPB’s Payday, Vehicle-Title, and Certain High-Cost Installment Loans rule (Small-Dollar Rule). The three-member panel decision calls into question the future viability of the CFPB…
New Mexico Governor Signs Bill to Impose 36% Rate Cap and Tough Anti-Evasion Provisions
Beginning next year, New Mexico will join a handful of other states (including, among others, California, Illinois, and Colorado) setting stringent interest rate caps on consumer loans. House Bill 132, which Gov. Michelle Lujan Grisham signed on March 1, 2022, will slash the annual percentage rate (APR) applicable to loans made under New Mexico’s…
CFPB Fall Supervisory Highlights Shed Light on Agency Priorities – Small Dollar Lending
The Fall Supervisory Highlights came out this month and reports the Bureau’s findings of examinations completed between January 2021 and June 2021. The CFPB publishes the Supervisory Highlights to help institutions better understand how the CFPB examines and monitors compliance with federal consumer financial laws. CFPB examiners often find problems during supervisory examinations that are…
CFPB Fall Supervisory Highlights Shed Light on Agency Priorities
Yesterday, the Consumer Financial Protection Bureau (CFPB) released its Fall Supervisory Highlights. The report covers examinations completed between January and June of 2021. Over the last year, the Biden-era CFPB has made various statements about its priorities. For instance, the Bureau has issued comments or taken action related to the small dollar lending agenda,…
Illinois Caps Consumer Loans at 36% Rate, Limiting Consumers’ Access to Credit
Last week, Illinois enacted the “Predatory Loan Prevention Act” (SB 1792), which would place a 36% rate cap on nearly all non-bank consumer loans. This act will essentially outlaw small-dollar loans in Illinois and may make ancillary products on auto loans, such as GAP insurance, unavailable for a large number of consumers. The act…
New Legislation in House, Senate Would Cap Consumer Loans at 36%, Crippling the Industry
New federal legislation introduced in the House and Senate would place a 36% annual percentage rate cap on nearly all consumer loans, potentially killing the small dollar consumer lending industry.
Last month, Congressmen Jesús G. “Chuy” García (D-IL) and Glen Grothman (R-WI) introduced H.R. 5050, the Veterans and Consumers Fair Credit Act. The bill…
The NCUA Doubles Amount Credit Unions Can Offer for Payday Alternative Loans
At the September open meeting, the National Credit Union Administration (NCUA) voted 2-1 to approve the final rule related to expanding payday alternative loan options (PAL II). Although the NCUA made clear in the final rule that the PAL II does not replace the PAL I, the flexibility of the PAL II will create new…
The CFPB (Yes, the CFPB!) Offers New Compliance Tools for Innovation
Companies that offer innovative consumer financial products and services have new tools to help them stay in compliance with federal consumer financial laws. In a refreshing twist from prior policy, the Consumer Financial Protection Bureau (CFPB) announced last week that it had revamped its No-Action Letter Policy and released a Compliance Assistance Sandbox and a…