Texas Bankers Association v. Consumer Financial Protection Bureau
Date: June 23, 2023
Issue: Whether the Consumer Financial Protection Bureau’s (CFPB) final rule implementing section 1071 of the Dodd-Frank Act is unconstitutional under the Appropriations Clause and violates the Administrative Procedure Act (APA).
Case Summary: A Texas federal district court partially granted a preliminary injunction brought by the American Bankers Association, Texas Bankers Association and Rio Bank (plaintiffs) to block implementation of CFPB’s 1071 Final Rule
In May, ABA joined the Texas Bankers Association and Rio Bank lawsuit to block CFPB from implementing the 1071 Final Rule. The 1071 Final Rule requires a covered financial institution to collect and annually report to CFPB data on covered applications from small businesses. In its amended complaint, Plaintiffs alleged the 1071 Final Rule should be vacated under the Fifth Circuit’s decision in Community Financial Services Association (CFSA) v. CFPB, which ruled CFPB’s funding structure is unconstitutional. Plaintiffs also alleged the 1071 Final Rule violates the APA because it is arbitrary and capricious, and CFPB its abused discretion by promulgating a final rule beyond the statutory scope.
Afterward, plaintiffs moved the court for a preliminary injunction. First, plaintiffs argued they are likely to succeed on the merits of their constitutional claim. Second, plaintiffs argued irreparable harm would occur without a stay. Finally, plaintiffs argued granting an injunction serves the public interest, as the interests of judicial efficiency weigh heavily in favor of a stay given the pending resolution of CFPB’s funding question.
The court partially granted plaintiffs’ motion for a preliminary injunction. To begin, the court concluded plaintiffs had standing for requesting a preliminary injunction. The court reasoned plaintiffs’ estimated compliance costs for the final rule were sufficiently concrete and particularized to confer standing. In addition, the court concluded these unrecoverable compliance costs will cause irreparable harm to plaintiffs’ members. Finally, considering equities and public interest, the court determined it could not conclude a stay would harm more than benefit the public interest. Therefore, the court agreed with the plaintiffs and found that a preliminary injunction was appropriate.
However, the court considered the scope of the preliminary injunction and determined it would only apply to plaintiffs’ members. Plaintiffs asserted the injunction should be nationwide because “limiting the relief to certain jurisdictions or parties would create patchwork ruling which would undermine the injunction and create unequal enforcement of an agency rule that is invalid.” According to the court circumstances warranting nationwide relief include a “constitutional uniformity principle” and “concern that patchwork rulings would undermine an injunction limited to certain jurisdictions.” However, the court emphasized generic reasons such as “nationwide scope” or “need for uniformity without more are insufficient.
Bottom Line: The preliminary injunction applies while the U.S. Supreme Court hears the constitutional challenge in CFPB v. CFSA, which is scheduled to be argued in October and whose decision could be released any time before the end of June 2024. At that point, new compliance deadlines would be issued for ABA and TBA members.