The CFPB has filed a motion to lift the stay of the compliance date for the payment provisions in its 2017 final payday/auto title/high-rate installment loan rule (2017 Rule).
In May 2018, the Texas federal district court hearing the lawsuit filed by two trade groups challenging the 2017 Rule entered an order staying the lawsuit. Subsequently, in November 2018, the court entered an order staying the August 19, 2019 compliance date for both the 2017 Rule’s ability-to-repay provisions and its payment provisions. Following the CFPB’s rescission of the 2017 Rule’s ability to repay provisions in July 2020, the parties jointly moved to lift the stay of the litigation. The court entered an order in August 2020 lifting the stay and the parties thereafter filed cross-motions for summary judgment. Briefing on the cross-motions concluded in December 2020.
Earlier this month, in response to the U.S. Supreme Court’s June 2021 decision in Collins v. Yellin (previously captioned Collins v. Mnuchin), the trade groups filed a Notice of Potential Relevant Appellate Proceedings (Notice). In Collins, relying on its decision in Seila Law, the Supreme Court held that the Federal Housing Finance Agency’s structure is unconstitutional because the Housing and Economic Recovery Act of 2008 only allows the President to remove the FHFA’s Director “for cause.” Despite ruling that the FHFA’s structure was unconstitutional, the Supreme Court also held that the proper remedy for the constitutional violation was not to invalidate the FHFA actions challenged by the plaintiffs. However, the Supreme Court stated that the plaintiffs might nevertheless be entitled to retrospective relief if they could show that the unconstitutional removal provision caused harm and remanded the case to the Fifth Circuit.
In the Notice, the trade groups advise the district court that the Fifth Circuit has ordered supplemental briefing on the impact of the Supreme Court’s decision in the Collins remand and in All American Check Cashing. (All American Check Cashing involves a constitutional challenge to a CFPB enforcement action which former Director Kraninger ratified following the Supreme Court’s Seila Law decision.) The trade groups point out that both Collins and All American Check Cashing involve the question of the appropriate remedy for actions taken by an agency director while unconstitutionally insulated from removal by the President. The CFPB filed a response to the Notice in which it contends there is no reason for the district court to defer a ruling on the cross-motions for summary judgment until the Fifth Circuit decides Collins and All American Check Cashing because those cases will not resolve any remaining issues regarding the payment provisions.
In its motion to lift the stay of the compliance date for the payment provision, the CFPB reasserts that the two cases do not warrant delay by the district court in deciding the cross-motions for summary judgment and asks the court to lift the stay of the compliance date if it nevertheless wishes to defer its decision until the Fifth Circuit rules in the two cases. According to the CFPB, the only reason offered by the trade groups for staying the compliance date was that the trade groups had a substantial case on the merits that the 2017 Rule was promulgated by a CFPB Director who was unconstitutionally insulated from removal. The CFPB argues that Collins confirms that the trade groups cannot obtain relief based on the unconstitutional removal provision.
It is possible that the primary motivation for the CFPB’s motion is not to lift the stay but rather is to prod the district court to rule on the summary judgment motions. Nevertheless, the CFPB’s continued insistence that the court should lift the stay, immediately or after a short delay, fails to appreciate that such an action would subject the industry to substantial costs and burdens at a time when it cannot know whether the payment provisions will be fully or partially validated by the courts and, critically, whether the rule’s treatment of debit card payments will survive. If the court validates the payment provisions in any respect, its decision on debit cards will have a huge impact on how the industry complies with the payment provisions. Thus, the stay should remain in effect for a sufficient period to allow a measured industry response after any unfavorable decision on the merits.