Portions reprinted with permission from the Minnesota Bankers Association
On July 31, a federal court in Texas issued an injunction preventing the CFPB from enforcing its 1071 rule until the U.S. Supreme Court decides on the constitutionality of the CFPB’s funding structure in a separate case. That ruling is expected in the summer of 2024. In the case brought by the Texas Bankers Association (TBA), the American Bankers Association (ABA) and Rio Bank, the plaintiffs requested relief for all institutions impacted by the rule. However, attorneys for the CFPB requested, and the judge agreed, to limit the scope of the injunction to banks that are members of the TBA and ABA. The court will determine whether banks are members of the TBA and ABA at the time the case on the constitutionality of the CFPB is decided, so it is possible for nonmembers of those associations to be covered by the injunction by joining before that date. The ABA and TBA sent a letter to Director Chopra of the CFPB on August 2, requesting that the CFPB postpone implementation of the rule for the entire banking industry.
Due to the limited scope of the injunction, the Independent Community Bankers of America and the Independent Bankers Association of Texas along with a Texas bank, filed an emergency motion for leave to intervene in the case. On August 10, the Credit Union National Association, Cornerstone Credit Union League and a credit union filed an emergency motion for leave to intervene in the case. On August 15, the court granted their motion to intervene. They seek to participate in the lawsuit as plaintiffs to protect their interest, which they say is identical to the interest of the original plaintiffs. The court granted their motion on August 14, which allows them to file their complaint with the court. Both groups filed a Motion for Preliminary Injunction, the Court has not decided the motions.
On Friday, August 11, the Kentucky Bankers Association (KBA) and eight of its member banks that are not members of ABA filed their own case against the CFPB in the Sixth Circuit. In The Monticello Banking Company et al v. Consumer Financial Protection Bureau et al, the plaintiffs seek a preliminary injunction to block the CFPB from implementing and enforcing their 1071 rule. The complaint challenges the authority of the CFPB to issue the 1071 rules, the procedure by which the rule was introduced and the content of the rule, including its infringement on banks’ Freedom of Speech.
KBA’s bylaws allow banks that have no physical presence in Kentucky to join as a non-voting member. KBA is offering this membership for $1 to banks that are not members of TBA or ABA. Should the court in this case grant a preliminary injunction, members of KBA would likely be protected the same way members of ABA and TBA are protected by the recent injunction. The membership with KBA would terminate at the end of this litigation. Any bank interested in KBA membership should send an email to KBA@kybanks.com with the subject line “OUT OF STATE MEMBERSHIP.” KBA will confirm receipt of the email and send a request for information needed and the method for transmitting the $1.