Hours before a scheduled hearing yesterday, the Consumer Financial Protection Bureau (CFPB or Bureau) filed an “Emergency Notice” in the U.S. Court of Appeals for the Fifth Circuit with respect to the ongoing litigation challenging the CFPB’s Small Business Lending Data Collection final rule under Section 1071 of the Dodd-Frank Act (the 1071 Rule), discussed here. The notice announced that, with the removal of CFPB Director Rohit Chopra over the weekend, “Counsel for the CFPB has been instructed not to make any appearances in litigation except to seek a pause in proceedings.” The notice is in line with an email that went to all CFPB staff yesterday, directing staff to halt most all of the CFPB’s activities in connection with the appointment of Treasury Secretary Scott Bessent to serve as the agency’s Acting Director (as discussed here). The CFPB is also seeking a “pause” in other litigation and, presumably, is halting non-public enforcement proceedings as well.
During the oral argument later in the day on the Administrative Procedure Act challenges to the 1071 Rule, counsel for the CFPB announced significantly that while the Bureau still sought a pause on the appeal, she had been authorized to state that the agency no longer opposed an earlier motion by the plaintiff trade associations for a stay and tolling of the compliance dates for 1071 Rule. The court asked counsel for the CFPB to put that new position in writing, and the agency agreed to do so.
Counsel for the appealing trade associations proceeded to make their argument why the 1071 Rule — or at least its requirements to request data on pricing and applicants’ LBGTQ status — should be vacated. After counsel took questions, and the CFPB undertook to provide further updates on its litigation position as soon as practicable, the court adjourned.
It does not appear that the Fifth Circuit will act on the 1071 Rule appeal until it receives an update in the near term from the CFPB on its position. However, and significantly, there does now seem to be a real possibility that the Fifth Circuit will grant the trade associations’ now unopposed request for a temporary stay and tolling of the 1071 Rule’s compliance dates, until the court can rule on the merits of the appeal. We expect an order from the court on that request as soon as this week. As counsel to one of the trade association plaintiffs, we will continue to monitor and provide updates developments on the litigation, as well as on developments at the CFPB generally with respect to the Rule.
Consistent with the position the CFPB took at the hearing on the 1071 Rule, the Bureau also sought a pause during oral argument before the same court today, in an appeal by the CFPB of other trade associations’ successful challenge to a 2022 update to its UDAAP examination procedures, in which the Bureau had attempted to take the position that discrimination is actionable under the “unfair” prong of UDAAP.