With the Supreme Court’s recent decision in Seila Law and Director Kathleen Kraninger’s ratification of the payment provisions of the Payday, Vehicle Title, and Certain High-Cost Installment Loans Rule (the “Small Dollar Rule”), the CFSA and the CFPB have submitted a joint status report in the stayed case pending in the Western District of Texas. While both the CFSA and the CFPB requested to lift the litigation stay in the status report, they fundamentally disagree on how the case should proceed, on the stay related to the compliance date of the payment provisions of the Small Dollar Rule, the substantive impact of Seila Law, and the ratification of the Small Dollar Rule.
As background on the case, in April 2018, the CFSA filed an action against the CFPB related to the Small Dollar Rule, seeking primarily to set aside the Small Dollar Rule based on the unconstitutional structure of the CFPB. After the CFPB announced that it planned to engage in rulemaking to alter the Small Dollar Rule, the court stayed the case and requested that the parties provide periodic updates. Additionally, in a subsequent order, the court delayed the compliance date for the Small Dollar Rule previously set for August 19, 2019, and the stays have remained in place to date.
On July 24, 2020, the parties filed a joint status report, which detailed important updates potentially impacting the case – namely, the Seila Law decision and the revised Small Dollar Rule. In the joint status report, both parties agree to lift the stay of the litigation, however, the CFPB takes the position that the “ratification cures any constitutional defect with the 2017 Payday Rule.” As such, the CFPB indicates that it plans to proceed with filing a motion to also lift the stay related to the compliance date for the payment provisions of the Small Dollar Rule. The CFSA disagrees that the ratification cured the constitutional defects in the rulemaking process and plans to oppose the lifting of the stay on the compliance date due to the irreparable injury that it will cause. Finally, the CFPB and the CFSA both indicate that the matter can be resolved on cross-motions for summary judgment but did not agree on the briefing schedule for the motions.
As indicated by the proposed order submitted by the parties, they are only seeking to lift the stay to proceed with the case. With respect to the stay of the compliance date, the CFPB intends to address it separately in a motion to lift the stay. While there is no way to tell how the court will rule regarding the compliance date, the court will likely focus on when the case can ultimately be resolved, especially in light of both parties agreeing that the case can be resolved on cross-motions for summary judgment. However, just as important is the fact that the CFPB under Director Kraninger clearly intends to push forward with implementation of the payment provisions of the Small Dollar Rule as quickly as possible. Accordingly, for those that the Small Dollar Rule impacts, it would be wise to start preparing for the rule to go into effect.