The trade groups challenging the payment provisions in the CFPB’s 2017 final payday/auto title/high-rate installment loan rule (2017 Rule) have filed their opening brief with the Fifth Circuit.  The trade groups filed an appeal with the Fifth Circuit from the district court’s final judgment granting the CFPB’s summary judgment motion and staying the compliance date for the payment provisions until 286 days after August 31, 2021 (which would have been until June 13, 2022).

The Fifth Circuit subsequently entered an order staying the compliance date of the payment provisions until 286 days after the trade groups’ appeal is resolved.

The trade groups’ primary argument on appeal continues to be that the 2017 Rule was void ab initio because the CFPA’s unconstitutional removal restriction means that the Bureau did not have the authority to promulgate the 2017 Rule.  They also argue that:

• Ratification cannot cure the constitutional defect because the defect concerns the unlawful exercise of governmental authority by the Bureau and its Director, not the authority of an agent to make decisions on behalf of the Bureau or its Director.  The only appropriate remedy for an invalid rulemaking is a valid rulemaking.
• The 2017 Rule continues to be invalid because there are two continuing separation of powers violations.  One violation arises from the Bureau’s funding mechanism which does not require Congressional appropriations.  The other violation arises from the Bureau’s unconstitutional exercise of legislative powers granted exclusively to Congress.  If Congress gives authority to agencies, it must articulate an intelligible principle.  There is no intelligible principle in the delegation of appropriations to the Director or in the Bureau’s “vague and sweeping UDAAP authority invoked to justify the [2017] Rule.”
• Even if ratification can sometimes cure defects in rulemaking, the Bureau’s ratification of the payment provisions violates both the CFPA and the APA because it was unlawful and arbitrary and capricious.  The ratification violates the APA and CFPA because it was a rulemaking that required notice-and-comment under the APA and did not satisfy the CFPA’s requirement for a cost-benefit analysis.  The ratification is arbitrary and capricious because the Bureau’s 2020 rulemaking revoking the 2017 Rule’s ability-to-repay provisions eliminated the justifications for the payment provisions by rejecting the Bureau’s prior UDAAP interpretation.  The ratification was also inconsistent with the cost-benefit analysis required by the CFPA because the Bureau’s 2017 cost-benefit analysis of the payment provisions relied on the ameliorative impacts of the ability-to-repay provisions which the 2020 rulemaking completely removed.
• Independent of the unlawful ratification, the payment provisions must be set aside as unlawful and arbitrary and capricious.  The payment provisions are unlawful because they fall outside of the Bureau’s UDAAP authority.  The Bureau based the payment provisions on unreasonable and overbroad interpretations of its UDAAP authority.  The payment provisions are arbitrary and capricious because the Bureau failed to consider the payment provisions’ countervailing effects, such as the increased likelihood that a loan will enter into collections sooner than it would have (if at all) and the Bureau acted based on stale data.  At a minimum, the payment provisions are arbitrary and capricious because of their coverage of separate installments of multi-payment installment loans and debit- and prepaid- card payments.  These payments and payment-transfer methods do not engender the harms targeted by the provisions.