NY judge pauses CFPB case against Credit Acceptance Corp.

A Consumer Financial Protection Bureau lawsuit against subprime auto lender Credit Acceptance Corp. is on hold after a New York court granted a motion for a stay pending the U.S. Supreme Court’s ruling on whether the bureau’s funding is constitutional. In a decision filed Monday, the U.S. District Court for the Southern District of New York agreed to Credit Acceptance Corp. (CAC)’s request to pause proceedings related to a CFPB lawsuit filed against the financier in January, according to the court order. The bureau’s suit claims that CAC was engaged in deceptive and unfair loan practices that cost New York borrowers “millions of dollars.” The Supreme Court is mulling whether Congress’ funding structure established for the bureau violates the Constitution after a 5th U.S. Circuit Court of Appeals decision earlier this year deemed the method unconstitutional. Cases in limbo A New York federal judge granted CAC’s motion for a stay on the grounds that the lawsuit against CAC raises questions that are directly tied to whether the CFPB’s funding mechanism is constitutional and, therefore, if the bureau can pursue the enforcement actions at hand, according to the court order. CAC backs the court's decision to pause the case, Doug Busk , chief treasury officer, told AFN in a prepared statement. “Credit Acceptance agrees with the Court’s decision to stay this case until the United States Supreme Court’s review of CFPB v. Community Financial Services Association is complete. The Supreme Court’s decision in that matter could have a significant impact on this case as it calls into question the constitutionality of the CFPB’s funding structure and could leave the CFPB unable to pursue its lawsuit against Credit Acceptance," Busk said. "The stay ensures that the court, the parties, or third parties are not subjected to unnecessary burdens or expenses of discovery before the Supreme Court resolves this threshold issue," he said. "Credit Acceptance has moved to dismiss the complaint on this and other grounds and continues to be focused on making it possible for any American, regardless of their credit, to buy a car from a dealer.” Since the appeals court decision, multiple CFPB cases have been granted stays until the Supreme Court’s ruling is announced, John Redding , partner at Alston & Bird , told Auto Finance News . In January, a New York federal judge granted a stay for a case involving CFPB enforcement action against a money-transfer business, according to published reports. “If the Supreme Court says that the CFPB is unconstitutional and everything they've done is void, the time, money and effort that has been spent litigating is gone, and the court has wasted time,” Redding said. “The underlying logic behind granting a stay makes sense.” The 5th Circuit, which hears cases from Louisiana, Mississippi and Texas, has generally granted stays related to the Supreme Court’s CFPB funding decision, Redding said. However, the 2nd U.S. Circuit Court of Appeals in April upheld the CFPB’s funding as constitutional. “There have been decisions that have gone both ways around the granting of a stay,” Redding said. “We have courts in Missouri and elsewhere that have refused to issue a stay based on the funding. It’s a jurisdiction-by-jurisdiction question.” The Supreme Court is expected to hear the CFPB funding case in October. Under the order granting a stay of the case against CAC, the parties must provide an update to the court by Nov. 3 or within one week after a “major development” in the funding case, whichever is earlier, according to the court filing. The Supreme Court’s decision could be announced by next spring, Redding said. It’s possible that other pending CFPB cases could be granted stays in the meantime, he said. Once a decision is reached, the parties involved in a paused case will likely request that the court remove the stay and then take the appropriate next steps, Redding said. Auto Finance Summit, the premier industry event for auto lending and leasing, returns October 29-31 at the Bellagio Las Vegas and features fireside chats with Hyundai Capital America and Ford Credit. To learn more about the 2023 event and register, visit <a class="fui-Link ___1eya986 f3rmtva f1ewtqcl fyind8e f1k6fduh f1w7gpdv fk6fouc fjoy568 figsok6 f1hu3pq6 f11qmguv f19f4twv f1tyq0we f1g0x7ka fhxju0i f1qch9an f1cnd47f fqv5qza f1vmzxwi f1o700av f13mvf36 f1cmlufx f9n3di6 f1ids18y f1tx3yz7 f1deo86v f1eh06m1 f1iescvh fhgqx19 f1olyrje f1p93eir f1nev41a f1h8hb77 f1x7u7e9 f10aw75t fsle3fq f17ae5zn" title="https://autofinance.live/afs/" href="https://autofinance.live/afs/" target="_blank" rel="noreferrer noopener" aria-label="Link autofinance.live/afs/"> autofinance.live/afs/ .

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