Fifth Circuit holds oral argument in trade groups’ challenge to CFPB payday loan rule

Yesterday, the Fifth Circuit held oral argument in the appeal filed by the Business Groups challenging the payment provisions of the CFPB’s 2017 Payday/Auto Title/High-Installment Loan Final Rule (2017 Rule). Click here for the recording of the argument.

The Professional Groups appealed the District Court’s final judgment granting the CFPB’s motion for summary judgment and staying the date to bring the payment provisions into compliance until 286 days after August 31, 2021 (which would have been until as of June 13, 2022). After the appeal was filed, the Fifth Circuit issued an order suspending the payment provision compliance date until 286 days after the Trade Groups appeal is resolved. The main argument of the trade groups on appeal continues to be that the 2017 rule was void ab-initio because the CFPA’s unconstitutional withdrawal restriction means the Bureau lacked the authority to enact the 2017 rule.

Before the oral argument, the professional groups presented the bench Fifth Circuit Decision in All U.S. check cashings as additional authority to the committee hearing their appeal. In all americanthe bench The Fifth Circuit ruled that the CFPB’s enforcement action against All American Check Cashing could proceed despite the unconstitutionality of the CFPA’s withdrawal restriction at the time the enforcement action was filed. As an alternative basis for challenging the CFPB’s constitutionality, All American had argued that the CFPB’s fiscal independence from Congress violated the Constitution’s checks and balances by violating the Appropriations Clause. (Consistent with Dodd-Frank, the CFPB receives its funding through requests made by the CFPB Director to the Federal Reserve, subject to a cap equal to 12% of the Federal Reserve budget, rather than through of the Congressional appropriations process.) In a concurring opinion joined by four other Fifth Circuit justices, Judge Edith Jones agreed with All American that the CFPB funding mechanism is unconstitutional and, therefore, the dismissal enforcement action is required. In the supplemental filing, the trade groups argue that the panel should strike down the 2017 rule based on Judge Jones’ concurring opinion.

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