CFPB won’t enforce Bounced Payment Rule held up by U.S. Supreme Court, Fifth Circuit
WASHINGTON – Today, the Consumer Financial Protection Bureau (CFPB) announced that it “will not prioritize enforcement or supervision actions with regard to any penalties or fines” against payday lenders and other high-cost lenders that violate a rule going into effect this weekend to protect consumers against multiple nonsufficient funds (NSF) and overdraft fees on unaffordable loans.
The Bounced Payment Rule, the remaining part of the 2017 payday loan rule, prohibits payday lenders, certain “buy now, pay later” (BNPL) lenders, and high-cost installment lenders that charge more than a 36% annual percentage rate (APR) from continuing to attempt to debit bank accounts after a payment bounces twice. After two consecutive bounces, the lender must ask the borrower for new permission to debit their account.
“It’s outrageous that the CFPB will not enforce the law that prohibits payday lenders and other 200% APR lenders from continually debiting people’s accounts, subjecting them to multiple NSF and overdraft fees,” said Lauren Saunders, associate director of the National Consumer Law Center. “After the ability-to-repay part of the rule was repealed, the CFPB under Director Kraninger, the U.S. Supreme Court, and the Fifth Circuit upheld the bare minimum protection against multiple NSF fees on unaffordable loans, but current CFPB leadership is now refusing to enforce the law.”
The CFPB also said that it was contemplating a new rulemaking to narrow the rule. A trade association for BNPL lenders has asked for an exemption.
”Buy now, pay later lenders that make unaffordable loans should not be allowed to keep hitting your bank account after payments bounce twice,” Saunders said. “It’s unconscionable to have greater protections for payday lenders than for people struggling to afford basic necessities.”
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