The CFPB has filed its opposition to the motion for a preliminary injunction filed by the intervenors in the Texas federal court lawsuit challenging the CFPB’s final small business lending rule (Rule).  The intervenors are several credit unions, community banks, and credit union and community bank trade associations.

In the Texas lawsuit, the court entered an order on July 31 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,” stays the deadlines for compliance with the Rule’s requirements pending the Supreme Court’s decision in CFSA, and extends the deadlines for compliance in the event of a reversal in CFSA.  At the CFPB’s urging, the court unfortunately denied the nationwide relief requested by the plaintiffs and only granted relief to the plaintiffs and their members.  (The plaintiffs are the American Bankers Association (ABA), Texas Bankers Association (TBA) and Rio Grande Bank.)

The limited relief prompted the credit union and community bank intervenors to file motions seeking leave to intervene and, after those motions were granted, prompted the community bank intervenors to file a preliminary injunction motion in which the credit union intervenors joined.  In their preliminary injunction motion, the intervenors have asked the Texas federal court to enter a preliminary injunction prohibiting the CFPB from enforcing the Rule nationwide or, alternatively, as to the intervenors and their members.

In its opposition, the CFPB makes the following principal arguments:

  • The intervenors have not met their burden of showing they are entitled to preliminary relief and, in particular, have not provided specific evidence of compliance costs that they are required to incur now, as opposed to years down the road.   For example, two of the bank intervenors appear to be “Tier 3” institutions that will not be required to comply with the Rule until January 1, 2026.  None of the trade association intervenors “specifically identify any member institution (other than [the bank and credit union intervenors]) [who are required to currently incur expenses] or establish with specific evidence any particular expense that such member is required to incur at this time.”
  • The CFPB disagrees with the court’s prior conclusion that the balance of harms and public interest favor a stay because there is copious evidence supporting the CFPB’s view that the Rule and the statutory requirements it implements will produce significant benefits for small businesses, the communities they serve, and lenders.
  • Even if the intervenors can show they are likely to succeed on the merits based on the Fifth Circuit CFSA decision, merely establishing a likelihood of success on the merits in not enough, on its own, to justify preliminary relief.  The intervenors provide no compelling reason for the court to reconsider its grant of limited relief to the plaintiffs and their members.
  • While the intervenors’ proposed order largely tracks the preliminary relief previously granted by the court, it would seem to sweep in more conduct.  It would not only preliminarily enjoin the CFPB from implementing and enforcing the Rule against the intervenors and their members, but would also order the CFPB to “immediately cease all implementation or enforcement” of the Rule.  For example, the CFPB’s understanding is that the current injunction against “implementing and enforcing the Final Rule against Plaintiffs and their members” does not prohibit the CFPB from answering implementation questions from regulated entities, including from the plaintiffs or their members, or otherwise providing guidance and information about the Rule.  However, the order sought by the intervenors could be understood to bar that conduct.
  • While it is unclear if the intervenors even mean to request broader relief, the CFPB raises this concern out of an abundance of caution due to the potential for confusion about the scope of any additional preliminary relief the court might order.  Broader relief is not appropriate because the irreparable injury alleged by the intervenors–having to spend money to prepare to comply with the Rule by the compliance dates–would be fully redressed by an order staying the compliance dates similar to what the court did in its prior order with respect to ABA or TBA members.

It is disappointing that the CFPB continues to argue, after having already lost the argument that preliminary relief is not warranted, that the intervenors’ injunction motion should be denied.  Hopefully, the court will recognize that only extending the preliminary relief it has granted to the plaintiffs to the intervenors and their members, rather than now granting nationwide relief to all entities covered by the Rule, will perpetuate disparity in how banks, credit unions, and non-banks are impacted by the Rule.  Should the court grant further preliminary relief that benefits only the intervenors and their members, there will likely be more intervention and preliminary injunction motions which will waste the time and resources of the court and the entities that believe it is necessary for them to take that route in order to obtain relief.  We would also think that the CFPB’s resources could be better used elsewhere.