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Thursday, March 28, 2024

CFPB fends off challenge to repeal of ban on high-interest loans

Federal Gov
Loan

WASHINGTON (Legal Newsline) – A federal judge has tossed a community group’s lawsuit that challenged the federal Consumer Financial Protection Bureau to remove prohibitions on short-term, high-interest loans like payday loans.

District of Columbia judge Amit Mehta on Jan. 14 decided the National Association for Latino Community Asset Builders lacked standing to bring suit and granted the CFPB’s motion to dismiss, which was filed about a year earlier.

At issue in the case is the CFPB’s 2020 Repeal Rule, which revokes a 2017 measure that prohibited short-term loans at high interest rates. NALCAB said the CFPB failed to consider the harms the repeal would inflict on the public, but Judge Mehta found NALCAB wasn’t injured itself.

“NALCAB cannot escape the conclusion that, under this Circuit’s current standing doctrine, its account of the 2020 Repeal Rule’s effects does not amount to a cognizable organizational injury,” Mehta wrote.

NALCAB also failed to establish standing by trying to represent its members. To establish associational standing, it needed to show at least one NALCAB member would have standing to sue, that the interests it sought to protect were “germane to its purposes” and that the relief requested did not require an individual member to participate in the lawsuit.

One of its members that advocates for Latino prosperity and community ownership, Mission Economic Development Agency, had standing, NALCAB argued. MEDA clients become trapped when unable to pay back the loans at issue and are forced to take out second loans to pay the first, the group said.

“NALCAB has identified nothing about the 2020 Repeal Rule that makes MEDA’s activities more difficult; lacking such an impairment, MEDA asserts only a frustration of its purpose, which cannot support standing,” Mehta wrote.

“NALCAB premises much of its argument as to MEDA on the assertion that clients trapped in unaffordable payday loans require on average three more weekly coaching sessions than other clients.

But allowing an organization’s increased resource expenditure because of an increased demand for its services to satisfy the impairment prong of the organizational-injury analysis subsumes the second prong and renders it superfluous.”

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