Salient insights on key enforcement and legal trends pertaining to the consumer financial services sector
This article is the second in a three-part series addressing a seminal Fifth Circuit case now pending before the U.S. Supreme Court. The case, CFSA v. CFPB, is scheduled for oral argument on October 2, 2023.
In last week’s post, Myth No. 1, we explained more than a decade of history, both legislative and…
This article is the first in a three-part series addressing a seminal Fifth Circuit case that is now pending before the U.S. Supreme Court. Each week, we will debunk each myth and address the implications for consumer finance regulation going forward.
Myth No. 1: CFSA’s matter presents a novel attack on the Bureau’s constitutionality
Background
As many readers are aware, the plaintiffs in Consumer Financial Services Association of America, Ltd, et al. v. Consumer Financial Protection Bureau et al. challenged the Consumer Financial Protection Bureau’s (“CFPB or Bureau”) new regulation concerning the payday loan industry. In federal court in Texas, the plaintiff also had asserted that the Bureau’s funding mechanism was unconstitutional, but it lost this argument. On appeal last fall however, the U.S. Court of Appeals for the Fifth Circuit reversed, concluding that legislative appropriations are required before the agency’s expenditure. The Fifth Circuit held that because the Bureau’s budgets are not subject to appropriations, its funding mechanism violated the Appropriations Clause of the Constitution. The case is pending before the U.S. Supreme Court and oral argument is now set for October 3, 2023.…
There is a broader trend in financial regulatory developments to implement traditionally consumer-style borrower protections in commercial lending. This is occurring at both the federal and state levels, each of which is discussed below.
Federal: CFPB Finalizes Rulemaking to Regulate Small Business Lending
For the first time since the formal launch of the Consumer Financial…
The Consumer Financial Protection Bureau (“CFPB”) recently took aim at Driver Loan LLC (the “Company”), a company which frequently offers loans to drivers of ride share services, for the Company’s alleged deceptive practices.[1] In its complaint, the CFPB described that, in addition to giving loans to drivers of Uber and Lyft, the Company also took deposits from consumers to fund these driver loans.[2] The CFPB alleged that the Company and its CEO created a deceptive business model because: (i) the Company told consumers they could deposit funds with it in FDIC insured accounts, although the accounts were not FDIC insured; (ii) consumers who deposited funds with the Company were promised a 15% rate of return which they did not receive; and (iii) the short term loans offered to drivers of ride share companies had an APR of, at times, over 900% when they were advertised as having APRs of 440%.[3]
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Continue Reading New Settlement Exhibits CFPB’s Continued Focus on Transparency for Short-Term Loans
On September 1, 2015, the Consumer Financial Protection Bureau (“CFPB”) won an important decision in which a federal court, for the first time, interpreted the meaning of “recklessly provid[ing] substantial assistance” under the Consumer Financial Protection Act (“CFPA”). Perhaps since it was an order denying the defendants’ motions to dismiss released just before the Labor…
