Ever since the Fifth Circuit Court of Appeals held last year in Community Financial Services Association (CFSA) v. CFPB that the Consumer Financial Protection Bureau’s funding structure violates the Constitution’s Appropriations Clause and the Supreme Court agreed to review the decision, the CFPB’s ability to complete its work has been stalled. In just the last week alone, federal courts have held up an important regulation on small business lending and an enforcement action against a large auto financing company.
On July 31, a Texas district court preliminarily enjoined the CFPB from implementing the final small business lending rule under the Equal Opportunity Act against two trade associations, a bank, and their members pending the Supreme Court’s consideration of the CFSA decision. The court also stayed all the compliance deadlines in the final rule for the parties involved. Generally, the rule requires financial institutions to collect and report data on applications for credit for small businesses. The trade associations and the bank had sued the CFPB challenging the validity of the final rule, which was scheduled to go into effect on August 29.
Most recently, on August 7, a district court in New York granted the motion of auto financing company, Credit Acceptance Corporation, to stay an enforcement action pending the Supreme Court’s decision in the CFSA case. In January, the CFPB and New York’s attorney general (NYAG) had initiated an enforcement action against Credit Acceptance, alleging that the auto financing company makes predatory auto loans with excessive interest rates and unaffordable add-on products to vulnerable consumers throughout the country.
Last December, in another CFPB/NYAG enforcement action, this time brought against MoneyGram for violations of the Remittance Transfer Rule and Regulation E, the court stayed the case until the Supreme Court hears the Fifth Circuit case.
The Supreme Court is scheduled to hear the impactful CFSA case on Oct. 3, and a decision will come in the months after.
