The industry trade groups challenging the CFPB’s final rule on Payday, Vehicle Title, and Certain High-Cost Installment Loans (the Rule) have filed their combined opposition to the CFPB’s cross-motion for summary judgment and reply to the CFPB’s opposition to the trade groups’ motion for summary judgment.  The combined motion follows the filing of an Amended Complaint by the trade groups focused on the Rule’s payments provisions, the filing of an Answer to the Amended Complaint by the CFPB, the filing of a motion for summary judgment by the trade groups, and the filing of a cross-motion for summary judgment and opposition to the trade groups’ summary judgment motion by the CFPB.

In the Amended Complaint, the trade groups allege that the Rule violates both the U.S. Constitution and the Administrative Procedures Act (APA) and that the payments provisions have additional infirmities that render them invalid.

The trade groups make the following principal arguments in their new filing:

  • The CFPB’s pre-Seila Law unconstitutional structure rendered all of the CFPB’s acts null and void.  Because the payments provisions were never validly adopted, they can only be enforced if the restructured Bureau conducts a new rulemaking process. Director Kraninger’s ratification of the payments provisions cannot cure a constitutionally tainted rule.  The circuit court cases cited by the Bureau in support of its position that Director Kraninger’s ratification cured the constitutional defect all involved enforcement proceedings or orders.  None involved an official’s attempt to ratify a completed rulemaking conducted by another official acting ultra vires years after the invalid rulemaking process ended.  The district court cases cited by the Bureau are also readily distinguished.
  • Even if ratification of rules is possible in some cases, Director Kraninger’s ratification of the payments provisions is invalid because:
    • The Bureau cannot ratify the payments provisions because it lacked the authority to adopt them at the time they were issued.
    • The Bureau’s ratification is arbitrary and capricious within the meaning of the APA because the payments provisions were based on three premises that the Bureau either rendered false or rejected in revoking the Rule’s underwriting provisions.  Such premises involve the Bureau’s 2017 cost-benefit analysis that assumed the existence of the underwriting provisions, the amount of time needed for implementation of the payments provisions, and the meaning of the Bureau’s UDAAP authority.
  • Even apart from the defective ratification, the payments provisions establish a usury limit in violation of the Dodd-Frank Act because they target installment loans above a specified interest rate.  The provisions are also arbitrary and capricious in violation of the APA for reasons that include (1) the Bureau’s failure to take into account important differences among the variety of payment transfers covered by the restriction on payment transfer attempts, (2) the Bureau’s refusal to exclude debit-card transactions, and (3) the Bureau’s denial of a petition for a rulemaking to amend the payments provisions to exclude debit-card transactions.

The trade groups also argue that if the court upholds the payments provisions and lifts its stay of the Rule’s effective date, it should not allow the Bureau to require immediate compliance.  They assert that the stay was requested 445 days before the effective date and was entered with 286 days remaining until the effective date.  Accordingly, the trade groups ask the court to allow companies 445 days, or alternatively 286 days, to comply with the payments provisions.

Under the scheduling order entered by the court, briefing will close on December 18, which is the deadline for the Bureau to file its reply in support of its cross-motion for summary judgment.  The court has not yet indicated whether it will hold oral argument on the summary judgment motions.