CFPB files brief with Fifth Circuit in trade groups’ challenge to CFPB payday loan rule | Ballard Spahr LLP

The CFPB filed his memoir with the Fifth Circuit in the appeal filed by the business groups challenging the payment provisions of the CFPB’s 2017 Final Rule on Paydays/Auto Titles/High Installment Loans (2017 Rule). 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 entered an order suspending the compliance date payment arrangements up to 286 days after resolution of the trade groups appeal. (Commercial groups filed its opening brief last month.)

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 opt-out restriction means the Bureau lacked the authority to enact the 2017 rule. In its brief, the CFPB argues that:

• The payment provisions 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 already failed for insufficient funds.
• The decision of the United States Supreme Court in Collins vs. Yellin excludes the argument of the professional groups that the 2017 rule is invalid because it was enacted by a director of the CFPB who unconstitutionally exercised governmental authority. Below collins, because the Bureau was headed by a duly appointed Director, the Bureau had the power at all times to combat unfair and abusive practices through rulemaking. Payment arrangements represent a valid exercise of this authority by the Bureau.
• While collins held that it was possible for the disputants to seek relief on the basis of an invalid removal provision, the disputants can only do so if they can show that the removal provision actually caused them harm. Trade groups cannot make this show because, whether or not President Trump wants to fire Director Cordray but feels constrained by the removal provision, President Trump’s appointee, Director Kraninger, has ratified the payment provisions. after it was clear that she could be revoked at will. This endorsement by an official serving at the pleasure of President Trump conclusively shows that any perceived restrictions on his ability to remove Director Cordray have had no impact on the payment arrangements and provide no basis to invalidate them.
• If the Court found that the dismissal provision prejudiced professional groups, it would have to conclude that any such prejudice was remedied by ratification. All appellate courts that have considered the issue have concluded that ratification may provide an appropriate remedy where a separation of powers issue calls into question the validity of an agency action. As in those cases, Director Kraninger’s ratification provided the business groups with full recourse (to the extent that recourse was necessary) for any harm they may have suffered as a result of the dismissal provision. Having taken place while it was removable at will, the ratification confirms that the professional groups have no reason to fear that their members will be subject to a rule which could contradict the opinion of the president. Article v
• Although a violation of the appropriations clause could justify the overriding of an agency rule, the provisions of the CFPA establishing the funding of the Office satisfy the appropriations clause because the receipt and use of funds by the Office are authorized by law.
• Congress did not violate the doctrine of nondelegation by authorizing the Bureau to spend up to a capped amount and to prevent unfair and abusive practices. The FPAC funding provision authorizes the Office to draw an amount, up to a specified limit, that the Director determines is “reasonably necessary to carry out [the Bureau’s authorities taking into account amounts made available to the Bureau in the preceding year].” This provision (as well as the entire FPAC) provides an intelligible principle to guide the Director’s decision-making. Likewise, because the CFPA provisions defining unfairness and abuse precisely describe the findings that the Bureau must make before it can determine that a practice is unfair or abusive, they provide a sufficiently intelligible principle.

[View source.]