The CFPB has filed its brief with the Fifth Circuit in the appeal filed by the trade groups challenging the payment provisions in the CFPB’s 2017 final payday/auto title/high-rate installment loan rule (2017 Rule).  The trade groups have appealed from the district court’s final judgment granting the CFPB’s summary judgment motion and staying the compliance date for the payment provisions until 286 days after August 31, 2021 (which would have been until June 13, 2022).  After the appeal was filed, the Fifth Circuit entered an order staying the compliance date of the payment provisions until 286 days after the trade groups’ appeal is resolved.  (The trade groups filed their opening brief last month.)

The trade groups’ primary argument on appeal continues to be that the 2017 Rule was void ab initio because the CFPA’s unconstitutional removal restriction means that the Bureau did not have the authority to promulgate the 2017 Rule.  In its brief, the CFPB argues that:

• The payment provisions reasonably address a narrowly defined unfair and abusive practice that harms ordinary borrowers—namely, the practice of making repeat withdrawal attempts on borrowers’ accounts after multiple attempts have already failed for insufficient funds.
• The U.S. Supreme Court’s decision in Collins v. Yellin forecloses the trade groups’ argument that the 2017 Rule is invalid because it was promulgated by a CFPB Director who was unconstitutionally exercising governmental authority.  Under Collins, because the Bureau was headed by a properly appointed Director, the Bureau at all times had the authority to address unfair and abusive practices through rulemaking.  The payment provisions represent a valid exercise of that authority by the Bureau.
• While Collins held that it was possible for challengers to obtain relief based on an invalid removal provision, challengers can do so only if they can show that the removal provision actually caused them harm.  The trade groups cannot make that showing because, regardless of whether President Trump wanted to fire Director Cordray but felt constrained by the removal provision, President Trump’s appointee, Director Kraninger, ratified the payment provisions after it was clear that she could be removed at will.  This approval by an official serving at President Trump’s pleasure conclusively shows that any perceived restriction on his ability to remove Director Cordray had no impact on the payment provisions and provides no basis to invalidate them.
• If the Court thought that the removal provision harmed the trade groups, it should hold that any such harm was remedied by ratification.  Every court of appeals to have considered the issue has concluded that ratification can provide a proper remedy where a separation of powers issue calls into question the validity of an agency action.  As in those cases, Director Kraninger’s ratification provided the trade groups with a full remedy (to the extent any remedy was needed) for any harm they could have suffered from the removal provision.  Having occurred when she was removable at will, the ratification confirms that the trade groups have no basis for concern that their members will be subject to a rule that might contradict the President’s view. Clause v
• Even if an Appropriations Clause violation could justify setting aside an agency rule, the CFPA provisions establishing the Bureau’s funding satisfy the Appropriations Clause because the Bureau’s receipt and use of funds are authorized by statute.
• Congress did not violate the non-delegation doctrine by authorizing the Bureau to spend up to a capped amount and to prevent unfair and abusive practices.  The CFPA’s funding provision authorizes the Bureau to draw an amount, up to a specified limit, that the Director determines is “reasonably necessary to carry out [the Bureau’s authorities taking into account amounts made available to the Bureau in the preceding year].”  This provision (together with the entire CFPA) provides an intelligible principle to guide the Director’s decision making.  Similarly, because the CFPA’s provisions defining unfairness and abusiveness describe with specificity the findings the Bureau must make before it can determine that a practice is unfair or abusive, they provide a sufficient intelligible principle.

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