A federal judge agreed to hold off on a predatory lending lawsuit from the CFPB against Credit Acceptance Corp. until the U.S. Supreme Court issues its decision on the bureau’s funding structure.
08/08/2023 1:30 P.M.
2 minute read
Another Consumer Financial Protection Bureau action is on hold pending the U.S. Supreme Court’s decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited (CFSA), a case challenging the constitutionality of the bureau’s funding structure that originated in the 5th Circuit.
This week, a federal judge stayed a lawsuit on predatory lending claims by the CFPB as well as New York Attorney General Letitia James against Credit Acceptance Corp., Reuters reports.
U.S. District Judge Jennifer Rearden cited the CFSA case in her decision to stay the Credit Acceptance Corp. lawsuit.
The company filed the lawsuit in March on the basis that the CFPB’s funding structure is unconstitutional under the Appropriations Clause, arguing that “a stay would avoid unnecessary litigation concerning ‘soon-to-be-settled constitutional issues’ before the Supreme Court in the CFSA case, according to the case decision on the stay (PDF).
However, the CFPB and attorney general said the bureau’s funding status does not impact the issues at hand in the lawsuit, primarily alleged violations of the Consumer Financial Protection Act.
The judge responded that the public has an interest in enforcement of the consumer protection laws, but “any potential harm to the public caused by delaying this action is outweighed by the benefit to consumers in proceeding in a streamlined fashion,” according to the Reuters report.
The judge also argued that a stay is warranted because the Supreme Court decision on the bureau’s funding structure “could contain guidance that would allow this litigation to proceed on a reasonable and efficient basis.”
Another case from James and the CFPB, CFPB v. Moneygram International, Inc., is also on hold until the Supreme Court issues its decision, according to Reuters.
Meanwhile, on the regulation front, a CFPB rule on small business lending data is on hold for a group of banks after they secured an injunction in court also pending the Supreme Court’s decision in CFSA, ACA International previously reported.
In his decision, Judge Randy Crane of the U.S. District for the Southern District of Texas granted the injunction on the grounds that the plaintiffs would likely succeed in their challenge to the CFPB’s rule after the 5th Circuit declared the bureau’s funding structure is unconstitutional, which prompted the Supreme Court case.
The Supreme Court will hear oral arguments in CFSA’s case on Oct. 3, 2023, after the CFPB appealed the 5th Circuit’s decision.
The Supreme Court will hear six cases between Oct. 2 and Oct. 11. A decision in the CFPB case is expected to be issued between December 2023 and the end of June 2024.