CFPB's New Payday Lending Rule Effective March 25, 2025

The Consumer Financial Protection Bureau (CFPB) has announced that its payday lending regulations will become effective on March 30, 2025. These regulations focus on payment provisions that prevent lenders from making more than two unsuccessful attempts to withdraw payment from a borrower's account without obtaining new authorization and require lenders to notify borrowers before the first withdrawal attempt and after two consecutive failures.

This decision follows a recent U.S. Supreme Court ruling affirming the legality of the CFPB's funding mechanism, a critical part of the lawsuit CFSA v. CFPB. The Fifth Circuit previously supported the claim that the CFPB's funding was unconstitutional, but the Supreme Court overturned this decision, leaving other challenges regarding the rule's creation and the CFPB's authority unresolved.

Following the Supreme Court's judgment, there was a request for a rehearing on topics not covered by the Supreme Court, spotlighting the procedural intricacies involved in this legal process. The CFPB argued against reopening the appeal, highlighting that the plaintiffs had missed the opportunity for a rehearing and emphasizing the finality of the Supreme Court's decision on funding, which directly impacts the effective date of the payday lending rules.

Our Opinion:

While we appreciate the CFPB's efforts to protect consumers, we believe the payday lending rule places an undue burden on alternative finance lenders. We should continue to advocate for a more balanced approach that considers the needs of both borrowers and lenders. As an industry, we must work together to find innovative solutions that promote responsible lending practices while ensuring access to credit for those who need it most.

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