On October 31, a Texas federal court ordered a stay in a Consumer Financial Protection Bureau (CFPB) enforcement action, pending the issuance of the Fifth Circuit mandate in Community Financial Services Association of America Ltd. v. CFPB, which declared the CFPB funding mechanism unconstitutional. In the enforcement action CFPB v. Populus Financial Group, Inc., the parties requested the stay since the mandate will control the resolution of key issues presented in the defendant’s pending motion to dismiss.

On September 23, defendant Populus Financial Group, Inc. filed a motion to dismiss, asserting that the CFPB’s funding structure violated constitutional separation of powers. As we discussed here, on October 19, the Fifth Circuit found the CFPB’s funding mechanism unconstitutional on the same basis.

The Fifth Circuit’s issuance of the mandate is automatically stayed until the CFPB’s 45-day period to file a petition for rehearing expires. If a petition is filed, the issuance of the mandate will be further stayed until disposition of that petition. If no rehearing petition is filed or the petition is denied, the CFPB can seek a discretionary stay of issuance of the mandate from the Fifth Circuit, pending the outcome of a certiorari petition if it files one. If the Fifth Circuit denies a stay, the CFPB can then seek a stay directly from the Supreme Court.

As co-counsel of record in the Populus case, Troutman Pepper will continue to monitor this case and all CFPB-related decisions for future developments, and we will continue to offer commentary about the long-term fallout of this decision in future blog posts.