The plaintiffs in the lawsuit filed in a Texas federal district court challenging the validity of the CFPB’s final rule implementing Section 1071 of the Dodd-Frank Act have filed a motion seeking a preliminary injunction. (The final rule was published in today’s Federal Register.) Originally filed last month naming the Texas Bankers Association and Rio Bank, McAllen, Texas as plaintiffs, the complaint was amended this month to add the American Bankers Association as a plaintiff.
On Thursday, June 15, 2023, from 12:00 p.m. to 1:00 p.m. ET, Ballard Spahr will hold a webinar, “An Even Deeper Dive into the CFPB’s Final Section 1071 Rule on Small Business Data Collection.” The webinar is a follow-up to our April webinar on the rule that had record-breaking attendance. We received many excellent questions from attendees and will be providing answers to those questions in the June webinar. For more information and to register for the June webinar, click here.
The amended complaint alleges that the 1071 rule is invalid because the CFPB’s funding structure is unconstitutional and because portions of the rule also violate various requirements of the Administrative Procedure Act. The plaintiffs’ constitutional argument is that because the CFPB’s funding structure violates the Appropriations Clause, the rule is invalid and should be vacated based on Community Financial Services Association of America Ltd. v. CFPB in which a Fifth Circuit panel held that the CFPB’s funding is unconstitutional. (The U.S. Supreme Court has agreed to review the decision in its next Term.)
In their preliminary injunction motion, the plaintiffs ask the court to enjoin the final rule and stay the compliance dates and to keep the preliminary injunction in place pending the Supreme Court’s decision in the CFSA case. In support of their motion, the plaintiffs assert that Rio Bank, as well as the plaintiff Associations’ other members, “are immediately beginning to undertake substantial expenses in preparation for the scheduled 2024 implementation of the [Section 1071 rule].” They allege that they satisfy the standard for issuance of a preliminary injunction because (1) they are likely to succeed on the merits of their constitutional claim, (2) plaintiffs and their members will be irreparably harmed without a stay because they will be forced to spend significant sums preparing to comply with the rule, and (3) the balance of equities leans heavily in the plaintiffs’ favor because the CFPB is seeking to enforce an invalid rule.