Last week, the House of Representatives voted 221-202 to approve SJ 32, a resolution introduced under the Congressional Review Act that repeals the CFPB's final Section 1071 Small Business Lending Regulations (Regulation 1071). did. The Senate voted to approve SJ 32 in October 2023. President Biden is expected to veto the resolution, but it is unlikely there will be enough votes to override his veto.
As previously noted, the more likely source of relief for industry are two pending lawsuits challenging the 1071 rule, one in the U.S. District Court in Texas and one in Kentucky. It is being held in the state's federal district court. Both district courts entered a preliminary injunction restraining the CFPB from implementing and enforcing this rule on a nationwide basis against all entities subject to this rule. (A federal court in Texas had previously issued an order granting preliminary relief only to the plaintiffs and their members.)
In addition to raising constitutional challenges to Rule 1071 based on the CFPB's funding mechanism, plaintiffs in both cases allege that the CFPB violated the Administrative Procedure Act in promulgating Rule 1071. Plaintiffs in the Kentucky case also argue that Rule 1071 violates the First Amendment. The question of whether the CFPB's funding mechanism is constitutional is currently before the Supreme Court in a lawsuit challenging the CFPB's payday lending rules. If the Supreme Court rules that the CFPB's funding is constitutional, or if the Supreme Court rules that the funding is unconstitutional but the constitutional violation does not affect the CFPB's actions other than payday lending rules. In this case, the district court will have to deal with the plaintiffs' constitutional action. Lawsuit.