On March 7, a cert petition was filed at the U.S. Supreme Court challenging a decision by the U.S. Court of Appeals for the Fifth Circuit on the CFPB’s payday lending rule. The petitioner, a financial services trade association, was denied a rehearing from the Fifth Circuit after losing its bid to the U.S. Supreme Court last year when the Court upheld the CFPB’s funding structure as constitutional. As previously covered by InfoBytes, the final payday lending rule was issued in 2017, but after multiple legal challenges, the rule’s effective date was previously stayed by the 5th Circuit until March 30, 2025. The petitioners now asked the Supreme Court to decide whether “a party challenging governmental action taken by an individual who remained in office against the President’s wishes due to an unconstitutional removal restriction must show that a hypothetical replacement officer would have taken a different action.”

Under the Dodd-Frank Act, the CFPB is led by a single director with a five-year term. Originally, the director would be only removable for cause, such as inefficiency, neglect or malfeasance, which the U.S. Supreme Court later deemed the CFPB’s removal provision as unconstitutional in Seila Law (covered here). Before President Trump assumed office in January 2017, the CFPB — led by then Director Richard Cordray — issued a proposed rulemaking targeting payday and other short-term, small-dollar loans. On appeal to the 5th Circuit, the petitioners argued that Cordray remained in office notwithstanding the President’s wishes that he step down and was thus able to promulgate the final payday lending rule. The 5th Circuit ruled the petitioners needed to show that a different outcome would have resulted had the CFPB director, at the time, was not Cordray. The petitioners asked the U.S. Supreme Court to vacate the rule on the grounds that the CFPB’s leadership structure was unconstitutional at the time the rule was promulgated.