Texas First Bank (Texas First), Independent Bankers Association of Texas (IBAT), and Independent Community Bankers of America (ICBA) (collectively, Proposed Intervenors) have filed an unopposed motion seeking leave from the court to intervene in the lawsuit challenging the CFPB’s final small business lending rule (Rule). Texas First is a Texas community bank, IBAT is a trade association that represents Texas community banks, and ICBA is a national trade association that represents community banks.
Last week, the Texas federal district court hearing the lawsuit issued an order that preliminarily enjoins the CFPB from implementing and enforcing the Rule “pending the Supreme Court’s reversal of [Community Financial Services Association of America Ltd. v. CFPB], a trial on the merits of this action, or until further order of this Court.” However, the court denied the plaintiffs’ request for nationwide injunctive relief and granted injunctive relief only to the plaintiffs and their members. The plaintiffs are the Texas Bankers Association (TBA), the American Bankers Association (ABA), and Rio Bank, McAllen, Texas. Thus, in addition to Rio Bank, the injunctive relief granted by the court extends only to the TBA, ABA, and members of TBA or ABA. The court also stayed the deadlines for compliance with the Rule’s requirements pending the Supreme Court’s decision in CFSA and extended the deadlines for compliance in the event of a reversal in CFSA but also limited that relief to the plaintiffs and their members.
Texas First states in the motion to intervene that it is a member of IBAT and ICBA, that is not a member of either ABA or TBA, and that many other community banks that are IBAT and ICBA members are not ABA or TBA members. The motion includes a certification from counsel for the Proposed Intervenors stating that he conferred with counsel for the CFPB and the plaintiffs and was advised that they are unopposed to the motion to intervene.
Proposed Intervenors argue that their motion to intervene is timely because it was not until the court entered the preliminary injunction on July 31 “that it became apparent that Proposed Intervenors needed to participate in this case to protect their own interests.” They assert that the plaintiffs cannot adequately represent their interests because:
All of ICBA and IBAT’s members are community banks, unlike the ABA and TBA whose membership includes some of the largest banks in the country. And, many of ICBA and IBAT’s members, like Texas First, are not members of ABA or TBA. Accordingly, and without minimizing the harm that the Final Rule will cause Plaintiffs, ICBA and IBAT members, like Texas First, face more challenges and unrecoverable expense relative to their size and business.
The motion to intervene seeks leave to file a Complaint in Intervention that is attached to the motion as an exhibit. The Complaint in Intervention tracks the allegations made in the complaint filed by the plaintiffs and seeks a judgment declaring the Rule invalid as well as preliminary and permanent injunctive relief enjoining enforcement of the Rule. The Proposed Intervenors ask the court to consider their motion on an emergency or expedited basis because they “stand to incur thousands of dollars in expenses associated with complying with the unconstitutional and unenforceable Final Rule, while many of their competitors—Plaintiffs and their member banks—have been granted injunctive relief.”
The motion to intervene follows a letter sent last week to Director Chopra by the ABA and TBA in which the ABA and TBA urge the CFPB to extend the stay granted by the court to all FDIC-insured banks. The letter did not, however, ask the CFPB to extend the relief to non-banks or credit unions.
ABA and TBA sent their letter to Director Chopra the day after we published a blog post urging the CFPB to agree to extend the relief granted by the Texas federal district court to all entities covered by the Rule. While we support the trade groups’ letter and the motion to intervene, we believe that the relief should also be available to credit unions and non-banks. Perhaps trade associations whose members include credit unions and non-banks will now also seek to intervene in the lawsuit.