On September 14, a federal district court in the Eastern District of Kentucky became the second court to issue an order granting, in part, a plaintiffs’ motion for a preliminary injunction enjoining the Consumer Financial Protection Bureau’s (CFPB or Bureau) from enforcing its final rule under § 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Final Rule) against the plaintiffs and their members. (A discussion of the first injunction issued by a Texas federal court can be found here.) The injunction in The Monticello Banking Company v. CFPB will dissolve if the U.S. Supreme Court reverses the Fifth Circuit in the Community Financial Services Association (CFSA) v CFPB case, which found the CFPB’s funding structure unconstitutional and, therefore, rules promulgated by the Bureau invalid.
In The Monticello Banking Company, the plaintiffs, seven Kentucky state-chartered banks, one national bank operating in Kentucky, and the Kentucky Bankers Association, filed suit arguing that because the Bureau issued the Final Rule with funds derived from unconstitutional sources, the Final Rule itself violates the Constitution. The plaintiffs then moved for a preliminary injunction to enjoin the CFPB from implementing and enforcing the Final Rule.
The district court granted the plaintiffs’ motion, but its practical impact seems limited. As the court conceded, “[b]efore the [Final] Rule becomes enforceable, a decision on the merits will be issued by the highest Court in the land. A preliminary injunction will create no harm to the CFPB nor the public since the [Final] Rule would not otherwise be enforceable in the interim.” Notably, and unlike the injunction entered in Texas, the Kentucky order does not delay the compliance date for the Final Rule for the duration of the court’s injunction.