CFPB files brief with Fifth Circuit in which trade groups challenge CFPB rule on payday loans | Ballard Spahr LLP
The CFPB submitted his brief with the Fifth Circuit in the complaint filed by the trade groups challenging the payment provisions in the CFPB Final Payday/Auto Title/High Installment Loan Rule of 2017 (2017 Rule). The trade groups have appealed the district court’s final judgment granting the CFPB’s motion for summary judgment and deferring the settlement date for payment terms to 286 days after August 31, 2021 (which would have been June 13, 2022). ). After the complaint was filed, the Fifth Circuit entered an order that endures the fulfillment date of payment terms up to 286 days after the decision on the trade groups’ complaint. (The trading groups submitted their opening speech Last month.)
The trade groups’ main argument on appeal remains that the 2017 rule was void from the beginning because the CFPA’s unconstitutional distance restriction means the Governing Board did not have the authority to promulgate the 2017 rule. In its brief, the CFPB argues:
- The Payment Rules reasonably address a narrowly defined unfair and abusive practice that harms ordinary borrowers – namely, the practice of making repeated withdrawal attempts from borrowers’ accounts after several attempts have failed due to insufficient funds.
- The decision of the US Supreme Court in Collins vs. Yellin dismisses the trade groups’ argument that the 2017 rule was invalid because it was promulgated by a CFPB director unconstitutionally exercising government powers. Under Collins, as the Bureau was headed by a duly appointed Director, the Bureau was empowered at all times to combat unfair and abusive practices through rule-making. The Payment Rules constitute a valid exercise of this authority by the Bureau.
- While Collins Having determined that challengers were able to seek remedial action based on an invalid distance determination, challengers can only do so if they can demonstrate that the distance determination actually caused them harm. The trade groups can’t show that, because regardless of whether President Trump wanted to fire Director Cordray but felt constrained by the removal rule, President Trump-appointed Director Kraninger ratified the payment rules after it was clear she could be removed at will. This approval, by an official serving at President Trump’s discretion, conclusively demonstrates that any perceived limitation on his ability to remove Director Cordray had no impact on the payment terms and provides no basis for invalidating them.
- If the Court considers that the distance provision has harmed trade groups, it should find that ratification has repaired that harm. Every appellate court that has dealt with this issue has concluded that ratification may provide an appropriate remedy when a separation of powers issue challenges the validity of an agency action. As in these cases, Director Kraninger’s ratification gave the trade groups full redress (to the extent that redress was needed) for any harm they might have suffered from the distance determination. The ratification, which came when it could be overturned at will, confirms that the trade groups have no reason to worry about their members being subjected to a rule that may contradict the President’s view. clause v
- Even where a violation of the funds clause could justify a waiver of an agency rule, the CFPA provisions determining bureau funding satisfy the means clause because the receipt and use of funds by the bureau is authorized by law.
- Congress has not violated the doctrine of non-delegation by empowering the bureau to spend up to a limited amount and prevent unfair and abusive practices. The CFPA Funding Policy authorizes the Governing Board to draw down an amount that the Director deems “reasonably necessary,” up to a specified limit [the Bureau’s authorities taking into account amounts made available to the Bureau in the preceding year].” This provision (along with the entire CFPA) provides an understandable principle intended to guide the Director’s decision-making. Because the CFPA’s provisions defining unfairness and abuse detail the determinations the Governing Board must make before it can determine that a practice is unfair or abusive, they provide a reasonably understandable principle.