In January 2023, the CFPB filed a lawsuit in a New York federal district court jointly with the New York Attorney General (NYAG) against an auto finance company alleging violations of the Consumer Financial Protection Act (CFPA) and New York law.  The CFPB and NYAG both allege that the defendant violated the CFPA by engaging in deceptive and abusive acts or practices and substantial assisting CFPA violations by the defendant’s affiliated auto dealers.  Only the NYAG alleges violations of New York law by the defendant.  All of the claims are based on allegations that the terms of the financing provided by the defendant were predatory.  The defendant filed a motion to dismiss the complaint in which it argued that the CFPB should be dismissed from the case because its funding mechanism is unconstitutional. 

While the motion to dismiss was pending, the defendant filed a motion to stay the lawsuit pending the U.S. Supreme Court’s decision in Community Financial Services Association of America Ltd. v. CFPB.  In the motion, the defendant argued that a stay would avoid unnecessary litigation concerning the constitutional issue.  It also argued that continued litigation with the NYAG would create uncertainty as to whether, and how, discovery (among other aspects of the case) could be limited to claims asserted by the NYAG.  The defendant also contended that proceeding with the lawsuit while CFSA is pending in the Supreme Court would lead to duplication and inefficiencies due to the substantial overlap between the CFPB’s and NYAG’s claims. 

The CFPB and NYAG opposed the stay on the ground that the CFPB’s funding was not relevant to the NYAG’s ability to pursue all eight causes of action on its own.  In addition, they disputed the defendant’s judicial efficiency concerns on the basis that the scope of the alleged CFPA violations were the same inside and outside of New York and that the parties could address any concerns about discovery specific to non-New York consumers without a stay.

The district court granted the stay sought by the defendant and ordered the parties to file a joint letter updating the court by the earlier of November 3, 2023 or one week after a major development in CFSA.  The Supreme Court has scheduled oral argument in CFSA for October 3, 2023.

In granting the stay, the district court found that the factors to be considered by the court favored staying the lawsuit.  More specifically, the court found:

  • A stay would not unduly prejudice the CFPB or NYAG.
  • The defendant’s interests are met by a stay because waiting for the Supreme Court’s decision in CFSA will clarify the legal issues and may help the defendant avoid unnecessary legal costs.
  •  A stay is in the interest of the court because if the court denied the stay and adjudicated the motion to dismiss, it would need to decide the constitutional challenge to the CFPB’s authority “to pass and enforce the laws directly implicated by the three federal claims in this case.”  Since the Supreme Court’s decision “may dispose of at least some of Plaintiffs’ claims,” proceeding with discovery would not advance interests of judicial economy.  Premature discovery would potentially be duplicative and costly because “Plaintiffs concede there is substantial factual and legal overlap among the New York and non-New York-specific causes of action, each of which alleges that Defendant engaged in the same core deceptive auto lending practices, employed throughout the United States, in violating consumer protection laws.”  Even if the question before the Supreme Court does not bear on the NYAG’s ability to pursue its claims, a stay can still be warranted when it would serve the interest of the court and judicial efficiency.
  • A stay is in the interest of persons not parties to the lawsuit and is in the public interest because considerations of judicial economy are relevant to the public interest.  Any risk that a stay could impact consumers by creating a risk that evidence will become stale is mitigated by the parties’ obligation to preserve potentially relevant documents and the likelihood the stay will be of relatively short duration.  Also, even though there is a public interest in the enforcement of consumer protection laws, the CFPB has not denied that the Supreme Court’s ruling could substantially impact its ability to proceed with the lawsuit.