In a blog post published at the end of last week, the CFPB announced that its payday lending rule (Rule) would go into effect on March 30, 2025.  Because the Rule’s ability to pay requirements were rescinded, the only remaining provisions of the Rule are its “payment provisions.”  Those provisions:

• Prohibit lenders from attempting to withdraw payment for a covered loan from a borrower’s account after two consecutive attempts have failed due to lack of sufficient funds, unless the borrower specifically provides new authorization to do so; and
• Require lenders to give consumers certain notices, such as advance notice before attempting to withdraw a payment for the first time and notice of the consumer’s rights when two consecutive payment attempts fail.

The Rule was the subject of the U.S. Supreme Court’s decision last month in CFSA v. CFPB which reversed the Fifth Circuit and held that the CFPB’s funding mechanism does not violate the Appropriations Clause of the U.S. Constitution.  The Fifth Circuit, in its October 2022 decision, agreed with the plaintiffs that the CFPB’s funding mechanism was unconstitutional but rejected the plaintiffs’ other arguments for invalidating the Rule.  In addition to their funding argument, the plaintiffs argued that (1) the Rule’s promulgation violated the Administrative Procedure Act; (2) the Rule was promulgated by a Director unconstitutionally insulated from presidential removal; and (3) the CFPB’s UDAAP rulemaking authority violates the Constitution’s separation of powers by running afoul of the nondelegation doctrine. 

In October 2021, when the plaintiffs filed their appeal from the district court’s decision rejecting their Appropriations Clause argument, the Fifth Circuit had stayed the compliance date of the Rule’s payment provisions until 286 days after resolution of their appeal.

On May 16, immediately following the Supreme Court’s decision, the plaintiffs submitted a letter to the Fifth Circuit in which they asserted that the Fifth Circuit panel had “erred in its disposition of the non-Appropriations Clause challenges in this case, which the Supreme Court did not review.”  They also asserted that because they were the prevailing party, they did not have a prior opportunity to seek rehearing in the Fifth Circuit concerning those challenges.  Accordingly, they stated their intention to file a rehearing petition following entry of any new judgment affirming the district court.  In addition, to give them an opportunity to seek a rehearing, they asked the Fifth Circuit to issue its mandate upon entry of a new judgment in accordance with the default timing provisions in Federal Rule of Appellate Procedure 41, rather than immediately. 

On June 14, in response to the plaintiffs’ letter, the CFPB submitted a letter to the Fifth Circuit asking the court to “reject Plaintiffs’ request that it depart from its standard procedures when this case returns from the Supreme Court so that Plaintiffs can take the extraordinary step of trying to reopen this now-resolved appeal.”

The CFPB  states that the time for the plaintiffs to seek rehearing expired on December 5, 2022.  It asserts that, contrary to the plaintiffs’ contention, the plaintiffs did have a prior opportunity to seek rehearing because rehearing petitions can be filed by any party and “[t]hus, prevailing parties can and do seek rehearing.” The CFPB further states:

Plaintiffs did not [seek rehearing].  Nor did they preserve a chance for later review by requesting a stay of the mandate or of their deadline to petition—even after the Bureau petitioned for certiorari.  Instead, Plaintiffs filed a cross-petition for certiorari asking the Supreme Court to review their non-funding claims.  The Court denied that request.  This Court should not entertain Plaintiffs’ bid for rehearing after Plaintiffs forwent that opportunity before.

The CFPB observes that while it assumes the Fifth Circuit will issue a new judgment when the case returns from the Supreme Court, it is unclear whether a new judgment is needed because the plaintiffs’ non-funding claims were already resolved by the Fifth Circuit’s 2022 decision.  The CFPB asserts that even if a new judgment is appropriate, it should be limited to the funding claims on which the Supreme Court granted certiorari and not on the plaintiffs’ other claims which were settled by the Fifth Circuit’s 2022 judgment.

The Supreme Court entered it judgment today (June 17) in CFSA v. CFPB.  This means that the 286-day period set by the Fifth Circuit would result in a March 30, 2025 effective date for the Rule.  Should the Fifth Circuit grant the plaintiffs’ request for a rehearing, it is likely the plaintiffs will also seek to extend the 286-day period pending the outcome of the rehearing and/or any further Supreme Court review.

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