The CFPB has filed a cross-motion for summary judgment in the lawsuit filed by the California Reinvestment Coalition, the National Association for Latino Community Asset Builders, and two individual small business owners seeking a declaration that the CFPB’s failure to issue regulations implementing Section 1071 violates the Administrative Procedure Act and an order directing the CFPB to issue such regulations within six months.  Earlier this month, the plaintiffs filed a motion for summary judgment and the case was assigned to a mediator.

The Bureau filed an answer to the amended complaint in which it asserted two affirmative defenses: the plaintiffs lack standing to bring the action and their APA claim is barred by the applicable statute of limitations.  The plaintiffs claim they are entitled to the relief they seek under the APA provision that allows a court to compel agency action that is “unreasonably delayed.”  Relying on Ninth Circuit precedent, the Bureau characterizes such an order as “a form of mandamus” that is justified only in “exceptional circumstances.”

The Bureau asserts such circumstances do not exist and it is not unreasonable for it to have not yet issued a Section 1071 rule because:

  • It “has made considerable progress in undertaking the information-gathering necessary to support an informed rulemaking
  • In Dodd-Frank, Congress assigned it multiple mandatory rulemakings but did not include Section 1071 rulemaking among those for which it imposed statutory deadlines, thus providing a “strong signal that Congress did not expect the Bureau to begin work on the Section 1071 rulemaking right away”
  • It “has a plan to ensure that it can promptly issue a thoughtful and effective rule to implement Section 1071”

In describing its rulemaking plan, the Bureau states that the plan “focuses on the next year of its rulemaking work.”  The Bureau “intends to complete its internal policymaking process in the  next six months” and within six months thereafter (estimated to be by next November), it “expects to release a detailed outline of the proposals under consideration” to be followed by a report issued by a SBREFA panel “within two months of being officially convened.”  However, because “the Bureau cannot predict the nature and extent of the comments it will receive in connection with the SBREFA process, or that it will receive in response to a notice of proposed rulemaking…the Bureau’s plan does not yet include intended dates for the issuance of a proposed or final rule.”  The Bureau notes, however, that “for completed rulemakings that went through the SBREFA process in recent years, the Bureau took roughly three to eleven months to issue a notice of proposed rulemaking after completion of the SBREFA process, and approximately eleven months to issue a final rule after the end of the proposal’s comment period.”

The Bureau further argues that the “exceptional circumstances” required for mandamus do not exist because: (1) the completion of rulemaking, while in the public interest, is not necessary to protect human health and rushing to issue a poorly designed rule could harm the businesses Section 1071 was meant to help, and (2) expediting the Section 1071 rulemaking further could interfere with other important regulatory projects such as addressing the temporary qualified mortgage provision.

The Bureau also makes the alternative argument that assuming the plaintiffs are entitled to any relief, such relief should not include a rulemaking deadline but should be limited to requiring the Bureau to issue periodic status reports on its rulemaking.  According to the Bureau, imposing such a deadline is only appropriate where it is necessary to protect human health or to deal with an agency that has ignored prior judicial warnings or mandates.

In its cross-motion, the Bureau references the symposium on Section 1071  that it held on November 6, 2019 as one of the actions it has taken to commence Section 1071 rulemaking.