A District Court judge presiding over a lawsuit filed by the Consumer Financial Protection Bureau and the Attorney General of New York yesterday granted a motion from the defendant to stay the case pending the outcome of a case before the Supreme Court that will determine the constitutionality of the CFPB’s funding structure.
A copy of the ruling in the case of Consumer Financial Protection Bureau and the People of the State of New York v. Credit Acceptance Corp. can be accessed by clicking here.
The CFPB and New York AG filed their lawsuit back in January, accusing it of tricking consumers into high-cost loans on used cars that resulted in unaffordable monthly payments, vehicles being repossessed, and customers facing debt collection lawsuits.
In October, the Supreme Court will hear arguments in Community Financial Services Association and Consumer Service Alliance of Texas v. Consumer Financial Protection Bureau, which originally revolved around a small-dollar lending rule the CFPB sought to release, but has since morphed into a case that seeks to determine whether the means in which the CFPB receives its annual budget — directly from the Federal Reserve Board rather than through the Congressional appropriations process — is constitutional or not.
Both the CFPB and the New York AG opposed the defendant’s motion to stay the case, arguing that how the Bureau is funded does not factor into the AG’s ability to pursue the eight causes of action it has filed in the case, and that staying the case would harm the public’s interest in vigorous enforcement of consumer protection laws.
A number of groups filed amicus briefs supporting the defendant’s motion to stay the proceedings, including the American Financial Services Association and the Consumer Bankers Association.
Ultimately, the dynamic of judicial economy swayed Judge Jennifer H. Rearden of the District Court for the Southern District of New York to grant the motion and stay the proceedings.
“If the Court denied Defendant’s request for a stay and adjudicated the pending motion to dismiss, it would need to decide Defendant’s constitutional challenge to the CFPB’s authority to pass and enforce the laws directly implicated by the three federal claims in this case,” Judge Rearden wrote. “Plaintiffs state that the Court ‘could choose to defer ruling on that issue to await further developments’ in the Supreme Court case, ‘while allowing the rest of this case,’ including discovery, ‘to proceed.’ However, where, as here, a forthcoming decision in another action may dispose of at least some of Plaintiffs’ claims, proceeding with ‘discovery . . . will serve little or no purpose’ and will not advance interests of judicial economy.”
