The CFPB and All American Check Cashing have agreed to a settlement in the CFPB’s enforcement action filed against All American in 2016 for alleged violations of the CFPA’s UDAAP prohibition in connection with check cashing services and small dollar loans offered by All American.  The settlement comes less than a month after a Fifth Circuit panel ruled in Community Financial Services Association v. CFPB (CFSA Case) that the CFPB’s funding structure violated the Appropriations Clause of the U.S. Constitution.

The Final Settlement Order requires Michael Gray, All American’s owner and president, to pay a civil money penalty of $899,350 to the Bureau “by reason of the [UDAAP violations] alleged in the Complaint.”  However, the amount Mr. Gray must pay is remitted by $889,350 as a result of his payment “of that amount in fines to the Mississippi Department of Banking and Consumer Finance.”  The Settlement Order includes the statement that the acts and practices alleged in the complaint resulted in harm to consumers equal to the amount of fees paid to cash checks and to borrow pursuant to certain lending programs and the amount of overpayments that were not refunded.  The district court also entered a separate order dismissing the lawsuit with prejudice.

The case had been remanded to the district court after the en banc Fifth Circuit ruled that the CFPB’s enforcement action against All American could proceed despite the unconstitutionality of the CFPB’s single-director-removable-only-for-cause-structure at the time the enforcement action was filed.  However, in a concurring opinion, five judges expressed their agreement with All American’s argument that the unconstitutionality of the CFPB’s funding mechanism required dismissal of the enforcement action.  Following the remand, the district court ordered that the case go to private mediation or a settlement conference before a magistrate judge, with the parties to decide which route they preferred.  The parties thereafter agreed to a settlement conference before a magistrate judge.  While the settlement discussions were pending, the Fifth Circuit panel adopted the reasoning of the concurring opinion in ruling in the CFSA Case that the CFPB’s funding structure violated the Appropriations Clause.

Assuming the CFPB plans to seek a rehearing in the Fifth Circuit or Supreme Court review in the CFSA Case, we find it surprising that the CFPB agreed to a settlement in All American Check Cashing before the panel decision in the CFSA Case becomes final rather than seek a stay of further proceedings pending the ultimate disposition of the CFSA Case.  The amount of the settlement suggests that the CFPB may be willing to settle cases pending in the Fifth Circuit for modest payments.  In addition to the settlement amount, it is also noteworthy that the CFPB did not obtain any other relief in the settlement.  While the dissolution of the corporate defendants in 2018 mooted the question of injunctive relief against them, the settlement does not include any injunctive relief as to Mr. Gray.