The CFPB has filed its reply in support of its cross-motion for summary judgment in the lawsuit filed by two industry trade groups challenging the CFPB’s final rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans (the 2017 Rule).  The briefing on the parties’ cross-motions for summary judgment has now closed.  The court has not yet indicated whether it will hold oral argument on the motions.

In their Amended Complaint and motion for summary judgment, the trade groups allege that the Rule violates both the U.S. Constitution and the Administrative Procedures Act (APA) and that the payments provisions have additional infirmities that render them invalid.

In its reply, the CFPB makes the following principal arguments:

• Director Kraninger’s ratification of the payments provisions provides an adequate remedy for the constitutional defect to the structure of the CFPB identified in Seila Law.  Discarding the payments provisions, as urged by the trade groups, would harm the other interests at stake which include the government’s interest in addressing unfair and abusive practices and the interests of consumers harmed by such practices.  Additionally, setting aside the payments provisions after they have been ratified by a Director fully accountable to the President would undermine the Article II authority that the Supreme Court sought to safeguard in holding the removal provision invalid.
• Because Seila Law did not find a problem with the authority of the Bureau itself but rather with the Director’s exercise of executive power on behalf of the Bureau, the payments provisions were not void from the start and can be validly ratified.
• Plaintiffs have failed to show the ratification of the payments provisions is arbitrary and capricious within the meaning of the APA. The repeal of the underwriting provisions did not give rise to an inconsistency with the 2017 Rule’s discussion of the payments provisions benefits and costs because the Bureau’s analysis considered those benefits and costs using a baseline in which the underwriting provisions did not exist.  The ratification did not change the amount of time companies have to come into compliance with the payments provisions because the 2017 Rule gave companies 21 months (until August 21, 2019) to prepare for compliance and the ratification affirms the 2019 compliance date along with other aspects of the provisions. The payments provisions were not based on an individualized risk standard for whether consumers lack understanding of material risks which the Bureau rejected in revoking the 2017 Rule’s underwriting provisions and are not inconsistent with the Bureau’s determination that the harms related to the underwriting provisions are reasonably avoidable by consumers.
• The Bureau’s refusal to exclude debit card transactions is not arbitrary and capricious because failed attempts to withdraw payments from debit card accounts can trigger overdraft fees and the payments provisions were not only designed to prevent NSF fees but “were also designed to prevent potential account closure, help consumers retain control over their accounts and prevent lender-imposed fees for failed payment attempts.”
• The Bureau’s denial of a petition for a rulemaking to amend the payments provisions to exclude debit card transactions was reasonable because the petition did not cite any new facts or changed circumstances that might call into doubt the basis for the Bureau’s decision.  In any event, even if the trade groups could prevail on this claim, the appropriate remedy would only be to order the Bureau to reconsider the petition and not to order the Bureau to grant the petition.
• The payments provisions do not establish a usury limit in violation of the Dodd-Frank Act because they do not ban some loans above a specified interest rate.
• The trade groups are not entitled to have the stay of the compliance date extended for 445 (or 286) days after final judgment if the court upholds the payments provisions and lifts its stay of the 2017 Rule’s effective date. The trade groups’ members “have already had 1,171 days and counting since the rule was issued to make the necessary adjustments” and the need for an extended delay “is even less now than when the Plaintiffs asked before” because they initially sought the extension when they had to prepare for compliance with both the  underwriting and the payments provisions.  The trade groups “have now been on notice for years that the Bureau had no plans to revisit the Payment Provisions and that the Court was not inclined to grant them the extended extra delay that they now claim to have relied on getting.”  However, the Bureau would be willing to agree to “a limited 30-day extension of the compliance-date stay beyond the date of final judgment.”