District Court Stays CFPB Payday Action Following 5th Circuit Ruling


On October 31, the U.S. District Court for the Northern District of Texas stayed an enforcement action filed by the CFPB against a Texas-based defendant payday lender until the United States Court of Appeals for the Fifth Circuit issues its warrant in CFSA v. CFPB. As previously covered by a Buckley Special alerta panel of three judges held unanimously CASA that the CFPB’s funding structure created by Congress violated the Appropriations Clause of the Constitution. The parties filed a joint movement asserting that there was a “good reason” to suspend further proceedings in the dispute, explaining that the “agreed suspension pending the issuance of the warrant in CASA will support an efficient resolution of the case, as the CFSA’s final decision will control the resolution of the key issues presented in [defendant’s] pending motion to dismiss. One of the arguments raised in the Respondent’s Motion to Dismiss centers on the assertion that the Bureau’s complaint should be dismissed because the agency’s funding structure violates the Constitution’s separation of powers.

In July, the Bureau sued the defendant for allegedly engaging in illegal debt collection practices and allegedly generating $240 million in reborrowing fees from borrowers eligible for free repayment plans, in violation of the CFPA (covered by InfoBytes here). According to the Bureau, the defendant “engaged in unfair, deceptive and abusive acts or practices by concealing the option of a free repayment plan from consumers who indicated that they could not repay their short-term loans and at high cost contracted by the defendant”. .” The defendant also allegedly attempted to collect payments by unfairly making unauthorized electronic withdrawals from more than 3,000 consumer bank accounts.

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