Last week, we published a blog post urging the CFPB to agree to extend the relief granted by the Texas federal district court in the lawsuit challenging the CFPB’s final small business lending rule (Rule) to all entities covered by the Rule.  The plaintiffs in the case are the Texas Bankers Association (TBA), the American Bankers Association (ABA), and Rio Bank, McAllen, Texas.  In addition to preliminarily enjoining 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,” the court 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.  However, instead of the nationwide relief requested by the plaintiffs, the court limited the relief it granted to Rio Bank, ABA, and TBA and members of ABA or TBA.

Since publishing the blog post, I recalled that in 2017, the U.S. Court of Appeals for the D.C. Circuit, in Clean Air Council v. Pruitt, addressed the issue of whether a federal agency can unilaterally stay the effective date of a regulation it has issued.  In the case, the D.C. Circuit ruled that the Environmental Protection Agency (EPA) lacked authority to stay the compliance date of an EPA rule concerning methane and other greenhouse gas emissions and vacated the stay.  According to the D.C. Circuit, by suspending the rule’s compliance date, the EPA’s stay was essentially an order delaying the rule’s effective date and therefore “tantamount to amending or revoking a rule.”  As a result, the D.C. Circuit concluded that the EPA could only take such action by complying with the Administrative Procedure Act (APA), including its notice and comment requirements.

Also since publishing the blog post, Texas First Bank (Texas First), Independent Bankers Association of Texas (IBAT), and Independent Community Bankers of America (ICBA) (collectively, Proposed Intervenors) filed an unopposed motion seeking leave from the Texas federal district court to intervene in the lawsuit challenging the 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.  We assume the Proposed Intervenors, if granted leave to file the proposed Complaint in Intervention attached to their motion for leave to intervene, will file a motion to obtain the same preliminary relief granted to the plaintiffs.  The CFPB will have an opportunity to respond to that motion and the court will need to decide if the Proposed Intervenors have standing and are entitled to the relief they seek.

Based on the  D.C. Circuit’s Clean Air Council decision, it appears that Director Chopra, even if so inclined, would be unable to unilaterally extend the court-ordered stay of the compliance date to all entities covered by the Rule.  Instead, it would be necessary for Director Chopra to propose a regulation that stays the Rule and that would be subject to notice and comment pursuant to the APA.  In the absence of such a proposal by the CFPB, the relief granted by the Texas federal district court can only be extended by court order.  Unless the court is willing to reconsider its order (either pursuant to a motion filed by one of the parties or sua sponte), entities not covered by the order will need to follow the approach of the Proposed Intervenors and also seek leave to intervene in the lawsuit and, if granted leave, move to obtain the same preliminary relief granted to the plaintiffs. 

We continue to believe that the relief granted by the court should be available to all banks, credit unions, and non-banks covered by the Rule.  Accordingly, we hope that motions to intervene will be filed by other trade associations whose members include those entities.