CFPB and Bankers Square Off Over Funding, Rulemaking

Learn why the CFPB and ICBA and other banking groups are going back and forth over the bureau's funding scheme and its small business reporting rule.

David Baumann


Aug 8



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David Baumann

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David Baumann

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Regulations governing payday lending and small business reporting at heart of debate.

Asking the U.S. Supreme Court to validate its funding mechanism as constitutional, the CFPB last week argued that the manner in which it is funded is not all that different from the way other agencies are funded.

The agency said that the Community Financial Services Association of America (CFSA) wants the court to adopt “radical new rules that would invalidate much of the federal budget.”

The CFSA, the trade group representing payday lenders, is challenging the agency’s payday lending rule, contending that it is invalid because the CFPB is funded outside of the annual appropriations process. The Fifth Circuit Court of Appeals agreed with the CFSA, and the Biden Administration has asked the Supreme Court to overturn that decision.

The court has agreed to take up the case; oral arguments are scheduled for Oct. 3.

Brief Filed

In its brief responding to the Fifth Circuit ruling, the CFPB cited several other agencies that do not go through the annual appropriations process, a group that includes the NCUA, which gets its funding through fees paid by credit unions.

“But respondents offer no principled basis for distinguishing the CFPB from other agencies with longstanding and concededly valid funding mechanisms,” the bureau stated.

The CFPB additionally maintained that even if the high court finds the agency’s funding structure unconstitutional, its payday lending rule and other past actions should remain in place.

Texas Case

In a separate case, the nation’s community bankers are asking a federal judge in Texas to expand an injunction blocking the CFPB’s small-business reporting rule.

U.S. District Judge Randy Crane of the of the Eastern District of Texas issued the injunction, blocking a rule that would require financial institutions to report their lending to women- and minority-owned businesses. In issuing the injunction, Crane cited the Fifth Circuit ruling that the CFPB’s funding was unconstitutional.

However, the injunction only covers the plaintiffs that filed the suit—members of the American Bankers Association (ABA), members of the Texas Bankers Association and Rio Bank.

Now, the Independent Community Bankers of America (ICBA), the Independent Bankers Association of Texas and Texas First Bank have asked Crane to expand the injunction, saying they too would “suffer irreparable harm if CFPB is not enjoined from enforcing the unconstitutional Final Rule against them.”

They also asked the federal judge to issue his ruling on an expedited basis, since the rule goes into effect on Aug. 29.

Letter to Chopra

The ICBA also sent a letter to CFPB Director Rohit Chopra asking him to issue a nationwide stay of the effective date of the rule, citing Crane’s ruling blocking the rule for the ABA, the Texas Bankers Association and Rio Bank.

“The CFPB should not allow some, but not all, community banks covered by the [lending reporting rule] to enjoy relief from implementing this onerous and complex rule,” ICBA President/CEO Rebeca Romero Rainey wrote.

She continued, “It is deeply concerning that banks and trade associations must litigate this issue when the CFPB has full authority to resolve confusion, avoid arbitrary and unjust results about which banks can or cannot stay implementation of the Section 1071 rule pending a Supreme Court ruling.”


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