November 7, 2018 | Press Releases
The Community Financial Services Association of America (CFSA) today announced that the United States District Court for the Western District of Texas, Austin Division, granted in part its Unopposed Motion for Reconsideration and stayed the small-dollar lending rule compliance date in CFSA’s lawsuit against the Consumer Financial Protection Bureau (CFPB or Bureau). The stay, which was originally requested in a joint motion signed by both parties to the lawsuit, Community Financial Services Association of America, Ltd. et al v. Consumer Financial Protection Bureau et al, suspends the Bureau’s implementation of the small-dollar lending rule pending further order of the court. The Court order also maintains the stay of further legal proceedings.
“We are pleased with the Court’s decision to hit the pause button on the Bureau’s misguided small-dollar rule, as staying the compliance date is the logical and reasonable approach to avoid forcing companies to endure the cost of complying with a rule that may never take effect,” said Dennis Shaul, CEO of CFSA. “The Bureau’s rulemaking process under former Director Cordray was seriously flawed from the very beginning. The Bureau failed to demonstrate consumer harm from small-dollar loans, ignored customer input on the rule, and disregarded unbiased research and data that undercut its pre-determined agenda.”
The Court’s order stays the August 2019 compliance date of the Bureau’s rule until further order of the court while the CFPB reconsiders the small-dollar lending rule, concluding that “to prevent irreparable injury, a stay of the Rule’s current compliance date of August 19, 2019, is appropriate.”
The parties both agreed in a previously filed joint motion that staying the compliance date would prevent irreparable injury to lenders that would have resulted from costly and time-consuming changes to business practices to comply with the rule while its status remained in question. As part of the agreement, the Bureau will provide the Court with periodic status reports during the stay and inform the court when the rulemaking process is complete.
“This is a rule that should never have been written in the first place, and we hope the Bureau will ultimately repeal it outright,” Shaul added. “The rule as written would decimate the industry, shutter small businesses, force many employees to lose their jobs, and deny millions of hardworking Americans access to much-needed credit. Opposition to the Bureau rule was record-breaking, with more than one million consumers speaking out against it. Yet, despite this massive outpouring of opposition, the Bureau ignored these individuals and instead imposed a regulation favored by partisan politicians and special-interest groups.”
CFSA filed its lawsuit on April 9, alleging that the Bureau rule exceeds the Bureau’s statutory authority and is arbitrary, capricious, and unsupported by substantial evidence in violation of the Administrative Procedure Act (APA). The lawsuit also argues that the Bureau’s structure is unconstitutional under the Constitution’s separation of powers because the agency’s powers are concentrated in a single, unchecked Director who is improperly insulated from both presidential supervision and congressional appropriation, and hence unaccountable to the American people.
The plaintiffs in the lawsuit are the Consumer Financial Services Association of America and Consumer Service Alliance of Texas, and defendants are the CFPB and Acting CFPB Director Mick Mulvaney.
Click here to view a copy of the Court Order.