REGular Blog: More Developments in CFPB Court Cases
We wrote last week about a Texas court that issued an injunction to stop the implementation of the CFPB's Section 1071 Rule. This rulemaking would impose additional reporting requirements on lenders who make a certain number of loans to small businesses. The reason for the injunction was that the Supreme Court will soon hear arguments on the Fifth Circuit's ruling that the CFPB's funding structure is unconstitutional, and the Texas court ruled that the CFPB cannot enforce the rule against the plaintiffs in their case until the Supreme Court rules in their case. There were a couple of related developments this week.
First, a New York judge issued a similar ruling in a separate case involving the CFPB. A lender, Credit Acceptance Corp., is being sued by the CFPB and the New York Attorney General over its lending practices. In that case, the plaintiffs allege that Credit Acceptance Corp. drove low-income borrowers into auto loans that they know the borrowers could not afford. However, on Monday the Judge put a hold on the case, staying proceedings until the Supreme Court rules on the constitutionality of the CFPB's funding structure. The New York court joins in the number of courts who are delaying cases involving the CFPB until this bigger issue gets resolved. All eyes will be on the Supreme Court during oral arguments in October, though a ruling is not likely to come until 2024.
Speaking of the Texas case, the injunction only bars the CFPB from enforcing the rule against plaintiffs in the case or their members. In that case, the plaintiffs suing the CFPB are the Texas Bankers Association, the American Bankers Association, and Rio Bank. That means that the injunction does not apply to any credit unions.
CUNA took action this week, filing an Unopposed Emergency Motion for Leave to Intervene. The motion, filed jointly by CUNA, the Cornerstone Credit Union League (which serves credit unions in Texas, Arkansas, Kansas, Missouri, and Oklahoma), and Rally Credit Union, seeks to participate in the lawsuit and be included in the injunction.
The motion argues that credit unions would be substantially affected by the ruling in this case and should be allowed to join. Credit unions aren't the only ones seeking to join this case - a similar motion has been filed by the Independent Community Bankers of America, the Independent Bankers Association of Texas, and Texas First Bank. If the motions are granted, the injunction that keeps the CFPB from implementing the 1071 Rule until the Supreme Court makes its ruling will also apply to any members of these groups. For credit unions, this would mean any credit union that is a member of CUNA or the Cornerstone League would be included in the injunction.
You can read about the credit union motion here: CUNA urges parity by filing motion to intervene in district court 1071 ruling | CUNA News and you can find the full motion here.
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