insideARM Weekly Recap- Week of May 13th, 2024

The ARM industry is never short on surprises. This past week was a perfect example of that and shows how difficult it can be to keep up with the big news and changes week in and week out. That’s why we at insideARM aim to bring you only the biggest stories that we feel you need to know about. Last week we brought you breaking news on the CFPB’s Late Fee Rule and an important Supreme Court ruling on the CFPB's funding structre, as well as advice on how to handle the aftermath of regulatory examinations, and a surprising development out California. Read on for a breakdown of last week's news and why we think you need to know about it!

We started the week hot with an article on Monday about news that broke late on Friday May 10th. This news came from the pending litigation in Texas regarding the CFPB’s Late Fee Rule that would cap credit card late fees at $8.00. The suit filed by trade groups challenged the legality of the CFPB’s rule and sought a preliminary injunction to prevent it from going into effect on May 14, 2024. On May 10, 2024, a District Court in Texas granted the trade groups’ request for a preliminary injunction, citing an inability to measure the potential injuries. It is important to note that the Court also took into account the argument that the CFPB’s funding structure has been found to be unconstitutional by the Fifth Circuit Court of Appeals and, therefore, the Late Fee Rule was unconstitutional as it was under that same structure. More on that below with our second breaking news of the week.

The Tuesday news was an article from Bridgeforce about regulatory examinations and enforcement actions. While most discussion on this issue focuses on how to prepare for these examinations and prevent enforcement actions, Bridgeforce instead outlines how best to respond to examination findings, and how to implement corrective actions. The article provides a remediation guideline as well as a step-by-step for remediation. This is especially important as many companies place far more emphasis (for good reason) on prevention and may not have a plan for if corrective actions are required.

On Wednesday, we elevated an article from Troutman Pepper regarding a law proposed by California’s DFPI that was denied by the Office of Administrative Law (“OAL”). The legislation would have classified Earned Wage Access products (services that provide employees with early access to their wages) as “loans.” If EWA were considered loans that would subject these services to greater regulation. The CFPB had also recently expressed support for the legislation but the OAL did not adhere to the necessary procedures or clarity standard set forth by the APA. This is noteworthy for two reasons: 1. It is always a surprise when legislation with broad support is rejected; and 2. The CFPB’s public support of the proposal may signal that EWA’s are a future focus of the Bureau.

Thursday provided another shake-up as we brought you news of the Supreme Court determining that the CFPB’s funding structure is constitutional as well as instant reactions from an industry veteran. The Court overruled a 5th Circuit Court of Appeals decision and held that the CFPB's structure satisfies the Appropriations Clause of the Constitution. The CFPB called the decision a “victory for American families.” While this is a big win for the CFPB, this decision will serve as a lesson for the industry for future challenges of CFPB authority. Most importantly, the Supreme Court’s ruling will have a major effect on current litigation that has been stayed because of the 5th Circuit’s previous ruling, including the Late Fee case in Texas from Tuesday’s news.

We appreciate you coming to us for your news and this weekly recap. Have more to catch up on? A recap of the news from the week of May 6th can be found here.

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