Two new developments occurred recently in the Texas lawsuit challenging the CFPB’s final small business lending rule (Rule).
First, the Texas federal district court granted the unopposed emergency motion of Texas First Bank (Texas First), Independent Bankers Association of Texas (IBAT), and Independent Community Bankers of America (ICBA) seeking leave to intervene in the lawsuit. Texas First is a Texas community bank, IBAT is a trade association that represents Texas community banks, and ICBA is a national trade association that represents community banks. The court also granted the movants leave to file the Complaint in Intervention attached to their motion.
Second, as expected, Texas First, IBAT, and ICBA filed a motion for preliminary injunction. The Texas federal court, in ruling on the preliminary injunction filed by the Texas Bankers Association (TBA), the American Bankers Association (ABA), and Rio Bank, McAllen, Texas, declined to grant the nationwide relief requested by the plaintiffs and instead granted preliminary relief that is limited to Rio Bank, ABA, and TBA and members of ABA or TBA. In their preliminary injunction motion, Texas First, IBAT, and ICBA “respectfully suggest that even if nationwide relief was not appropriate previously, it is now.” Among the arguments they make in favor of nationwide relief is that the current limited relief “only has the effect of disproportionately favoring larger financial institutions over smaller ones based on their trade association.” They argue further that “even were the injunction extended to Plaintiff-Intervenors and their members, it would still arbitrarily exclude those financial institutions that are not members of the organizations currently in the case.” They also assert:
Before the recent intervention motions, it could have been argued that Plaintiffs did not represent the whole of the regulated industry. But the recent interventions make clear that…all of the regulated industry believes that the rule was invalidly promulgated. Between Plaintiffs and Intervenors, nearly all of the covered institutions in the country are now represented in this case. This Court need not, and should not, require every such institution to intervene or bring suit to conclude…that a nationwide injunction is therefore appropriate. (emphasis included.)
Accordingly, Texas First, IBAT, and ICBA ask the court to enter a preliminary injunction prohibiting the CFPB from enforcing the Rule nationwide or, alternatively, as to Texas First, IBAT, ICBA, and members of IBAT or ICBA.
The Texas federal court has already granted the Unopposed Emergency Motion for Leave to Intervene filed by Rally Credit Union (Rally), a Texas-chartered credit union, the Credit Union National Association (CUNA), a national credit union trade association, and Cornerstone Credit Union League (CCUL), a regional credit union trade association. We expect Rally, CUNA and CCUL to now also file a Motion for Preliminary Injunction to obtain relief for Rally, CUNA, and CCUL and members of CUNA or CCUL.
The CFPB will have an opportunity to respond to the preliminary injunction motions and the court will need to decide if the intervenors have standing and are entitled to the relief they seek. In responding to the preliminary injunction motion filed by Texas First, IBAT, and ICBA, the CFPB will also have an opportunity to revisit its decision to oppose nationwide preliminary injunctive relief.
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