Bank associations have secured an injunction in their case challenging the rule until the U.S. Supreme Court issues its decision on the CFPB’s funding structure.
08/01/2023 1:40 P.M.
2.5 minute read
A Consumer Financial Protection Bureau rule on small business lending data is on hold for a group of banks after they secured an injunction in court.
The injunction means the banks do not have to comply with the rule until the U.S. Supreme Court issues its 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.
The Texas Bankers Association, including Rio Bank, filed suit to block the CFPB’s rule in April, “arguing that the CFPB shouldn’t have been able to finish the proposal because the 5th Circuit ruled the agency’s funding was unconstitutional,” Bloomberg Law reports.
The American Bankers Association joined the case in May.
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, according to the Bloomberg Law report.
The injunction applies only to the members of the Texas Bankers Association and the American Bankers Association’s U.S. members.
The CFPB argued the plaintiffs did not have standing to request the injunction, but Judge Crane proceeded with considering the case.
Judge Crane also ordered that all deadlines for compliance with the small business lending rule are stayed for the plaintiffs until the Supreme Court’s final decision in the CFSA case.
Read the decision from Judge Crane here.
From the 5th Circuit to the Supreme Court
The CFSA also challenged a rule from the CFPB, the 2017 payday lending rule and the bureau’s constitutionality when it sued in the 5th Circuit, ACA International previously reported.
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 court granted the CFPB’s petition (PDF) for certiorari to review the decision, requesting that the court address whether the 5th Circuit Court of Appeals erred in its ruling that the bureau’s funding structure through the Federal Reserve rather than the congressional appropriations process violates the U.S. Constitution’s separation of powers.
ACA filed an amicus brief (PDF) in the case arguing that the Supreme Court should affirm the 5th Circuit’s decision on the CFPB’s funding structure but delay its judgment for six months to allow Congress time to consider options to reconstitute the bureau while minimizing disruptions for consumers and regulated entities, ACA previously reported.
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.
Dozens of additional amicus briefs have been filed in the case showing support on both sides, ACA previously reported.