Earlier this month, the CFPB filed a notice with the Texas federal district court that it is appealing to the Fifth Circuit the district court’s order granting summary judgment to a group of trade associations in their lawsuit against the CFPB challenging the changes made to its UDAAP Exam Manual in March 2022.  Last week, the Fifth Circuit entered an order granting the CFPB’s unopposed motion to stay further proceedings in the Fifth Circuit pending the U.S. Supreme Court’s decision in Community Financial Services Association of America Ltd. v. CFPB.  

It is not surprising that the CFPB sought a stay since the Fifth Circuit was likely to affirm the district court order based on the Fifth Circuit’s CFSA v. CFPB decision unless the Supreme Court had reversed that decision by the time the Fifth Circuit decided the case.  In its motion seeking the stay, the CFPB stated that briefing should be held in abeyance pending the Supreme Court’s resolution of CFSA because “[a]s the district court recognized, the resolution of the funding issue in this case is currently controlled by this Court’s decision in CFSA.”

In vacating the changes to the Exam Manual, the district court concluded that the changes were invalid because: first, based on the Fifth Circuit’s opinion in CFSA v. CFPB, the CFPB’s funding is unconstitutional under the Appropriations Clause, and, second, relying on the Supreme Court’s “major questions doctrine,”  the changes exceeded the CFPB’s UDAAP authority.  Thus, if the Supreme Court reverses in CFSA, the Fifth Circuit will need to decide whether the district court’s ruling based on the “major questions doctrine” was correct.

Even if the Supreme Court affirms in CFSA, it is still possible that the Fifth Circuit may need to reach the issue of whether the “major questions doctrine“ applies to the Exam Manual changes.  If the Supreme Court rules that the constitutional violation does not impact any prior CFPB actions other than the payday loan rule at issue in CFSA or if Congress ratifies all prior CFPB actions, the Fifth Circuit could need to consider the merits of the plaintiffs’ alternative,  non-constitutional arguments for invalidating the Exam Manual changes.   

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