Consumer Financial Protection Bureau
CFPB v. Credit Acceptance Corporation
Date: Aug. 7, 2023
Issue: Whether Credit Acceptance Corporation violated the Consumer Financial Protection Act (CFPA) by engaging in deceptive and abusive acts or practices.
Case Summary: A New York federal court granted a stay in the Consumer Financial Protection Bureau (CFPB) and New York attorney general’s lawsuit against Credit Acceptance Corporation pending resolution of the Supreme Court’s decision in CFPB v. Community Financial Services Association (CFSA).
In January, CFPB and NYAG jointly sued Credit Acceptance Corporation alleging the auto finance company violated the CFPA by engaging in deceptive and abusive acts or practices and substantially assisting CFPA violations by the company’s affiliated auto dealers. NYAG separately alleges Credit Acceptance Corporation violated New York consumer protection laws by making predatory auto loans to vulnerable consumers. Credit Acceptance Corporation moved to dismiss, arguing the court should dismiss from the case because its funding mechanism is unconstitutional. Further, Credit Acceptance Corporation contended CFPB’s statutory funding mechanism violates the U.S. Constitution’s Appropriation Clause.
According to Credit Acceptance Corporation, the constitutional questions raised in Consumer Financial Services Association (CFSA) v. CFPB “go directly to whether the CFPB may prosecute this action”. In CFSA, the Fifth Circuit ruled CFPB’s funding structure is unconstitutional under the Appropriations Clause. The Fifth Circuit determined Congress’s decision to abdicate its appropriations power under the Constitution by ceding its power of the purse to CFPB violates the Constitution’s structural separation of powers. The Supreme Court granted CFPB’s certiorari petition on Feb. 27, 2023.
Credit Acceptance Corporation moved to stay the lawsuit pending the U.S. Supreme Court’s decision in CFSA. Credit Acceptance Corporation argued proceeding with the lawsuit while CFSA is pending leads to duplication and inefficiencies due to the substantial overlap between CFPB’s and NYAG’s claims. CFPB and NYAG opposed the stay, arguing CFPB’s funding is irrelevant to NYAG’s ability to pursue causes of action on its own. Additionally, CFPB and NYAG disputed Credit Acceptance Corporation’s judicial efficiency concerns on the basis any concern about discovery specific to non-New York consumer could easily be addressed without a stay.
The district court granted the stay and ordered the parties to file a joint letter updating the court by November 3, 2023, or one week after a major development in CFSA. First, the district court concluded a stay would not unduly prejudice the plaintiffs. The court emphasized the stay may advance plaintiffs’ interests “by providing the Court with guidance as to the quality, nature, and validity of their claims.” Second, the court concluded a stay is in the interest of the court. According to the court, the Supreme Court’s decision in CFSA “may dispose of at least some of plaintiffs’ claims.” Therefore, proceeding with discovery would not advance interests of judicial economy. The court emphasized premature discovery would potentially be duplicative and costly. Finally, the court determined a stay is “in the interests of persons not parties to the civil litigation.” According to the court, proceeding with this case could lead to unnecessary litigation, which is time-consuming for the court.
Bottom Line: Oral arguments are scheduled in the Supreme Court in CFSA v. CFPB for Oct. 3, 2023.