As previously reported, the U.S. House of Representatives voted 221-202 to invalidate the CFPB's final Section 1071 Small Business Lending Regulations (Regulation 1071) under the Congressional Review Act, and the U.S. Senate passed by 53 votes. -44, voted as well. As expected, on December 19, 2023, President Biden vetoed the bill.
Based on the margin of each vote, it seems unlikely that Congress will override the veto. As a result, attention has been drawn to two lawsuits challenging this rule in federal district courts in Kentucky and Texas, as well as a lawsuit challenging the constitutionality of the CFPB's funding structure currently before the Supreme Court. It turns out. The Kentucky and Texas lawsuits are based on a decision by the U.S. Court of Appeals for the Fifth Circuit, which held that the CFPB's funding structure is unconstitutional and therefore Rule 1071 is invalid. Contains claims. Community Financial Services Association of America, Inc. v. CFPB, and because some of the rules also violate various requirements of the Administrative Procedures Act (APA). The Kentucky lawsuit also includes First Amendment claims. On October 3, 2023, the United States Supreme Court heard oral arguments. CFSA vs. CFPB Lawsuitand a verdict is not expected until June 2024 at the latest.
Courts in Kentucky and Texas have granted interim injunctions against the CFPB from implementing and enforcing Rule 1071. While the preliminary injunction in the Texas case was initially limited to the plaintiffs and their members, the preliminary injunction in the Kentucky case was less limited. A preliminary injunction in the Texas case was later extended to apply nationwide. The court's order in the Texas case (1) establishes the Supreme Court's deadline for compliance with Rule 1071 for plaintiffs and their members, parties intervening in the case after the initial judgment and their members, and all covered financial institutions. The sentence will be extended until the end of the sentence.decision at CFSA vs. CFPB, (2) require the CFPB to extend the 1071 Rule compliance deadline to make up for the suspension period if the Supreme Court rules that the funding is constitutional; The court's order in the Kentucky case does not provide for such an extension of the compliance deadline.