The Fifth Circuit held oral argument yesterday in the appeal filed by the trade groups challenging the payment provisions in the CFPB’s 2017 final payday/auto title/high-rate installment loan rule (2017 Rule). Click here for the recording of the oral argument.
The trade groups have appealed from the district court’s final judgment granting the CFPB’s summary judgment motion and staying the compliance date for the payment provisions until 286 days after August 31, 2021 (which would have been until June 13, 2022). After the appeal was filed, the Fifth Circuit entered an order staying the compliance date of the payment provisions until 286 days after the trade groups’ appeal is resolved. The trade groups’ primary argument on appeal continues to be that the 2017 Rule was void ab initio because the CFPA’s unconstitutional removal restriction means that the Bureau did not have the authority to promulgate the 2017 Rule.
In advance of the oral argument, the trade groups submitted the en banc Fifth Circuit decision in All American Check Cashing as supplemental authority to the panel hearing their appeal. In All American, the en banc Fifth Circuit ruled that the CFPB’s enforcement action against All American Check Cashing could proceed despite the unconstitutionality of the CFPA’s removal 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 budgetary independence from Congress contravenes the Constitution’s separation of powers by violating the Appropriations Clause. (Pursuant to 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’s budget, rather than through the Congressional appropriations process.) In a concurring opinion in which four other Fifth Circuit judges joined, Judge Edith Jones agreed with All American that the CFPB’ funding mechanism is unconstitutional and, as a result, dismissal of the enforcement action is required. In the supplemental filing, the trade groups argue that the panel should invalidate the 2017 Rule based on Judge Jones’ concurring opinion.