SDNY Judge Stays CFPB Suit Pending SCOTUS Action

A New York federal judge recently stayed a Consumer Financial Protection Bureau enforcement action pending the U.S. Supreme Court’s review of a certiorari petition in Community Financial Services of America Ltd. v. CFPB—a separate case with broad implications for the CFPB’s enforcement authority.

In April 2022, the CFPB filed suit against a money-transfer business, alleging that it failed to comply with a number of requirements imposed by a 2013 CFPB Rule—the Remittance Rule. This Rule requires money-transfer businesses to disclose critical pricing and timing information and provide remedies for consumers when transfers are not properly executed. The Complaint alleged that the business engaged in a number of violations that led to unnecessary transfer delays, harming customers.

In October 2022, the business filed a motion to dismiss the suit, citing the Fifth Circuit decision in Community Financial Services of America Ltd. v. CFPB, which declared the CFPB’s funding mechanism unconstitutional and that the appropriate remedy is dismissal of the enforcement action. After the CFPB filed a certiorari petition in that case, the business subsequently argued that a decision on its motion to dismiss should be stayed pending the Supreme Court’s review of the certiorari petition.

In December, Judge Katherine Polk Failla granted the motion to stay and acknowledged that the certiorari petition and potential Supreme Court decision in CFSA v. CFPB directly bear on the issues in this case.

Judge Failla rejected the CFPB’s arguments against the stay, including concerns over efficiency and the need to enforce consumer protection laws.