Payday Lenders Gave Millions to Republican Group That Backed Supreme Court Suit to Annihilate CFPB

The Supreme Court is set to rule this term in a case that could lead to the elimination of the Consumer Financial Protection Bureau. A federal agency tasked with protecting consumers from predatory lending and banking practices, the CFPB is being sued by two trade groups representing industries it regulates: The groups filed their suit in 2018 over a rule aimed at protecting borrowers from payday lenders.

The case is the latest step in a yearslong conservative fight to dismantle the CFPB. At least 13 states, including red states like Arkansas and Georgia, have limited or made payday lending illegal, and others have passed recent ballot initiatives to crack down on the industry. 

“The attorney generals are collecting millions of dollars in campaign contributions to undermine the only serious effort to regulate payday loans.”

Despite widespread approval among Republican voters to regulate or prohibit payday lending, Republican officials in more than 20 states are backing industry groups in the suit. All but two of the 28 members of the Republican Attorneys General Association, or RAGA, sought to intervene in the case. The move came after payday lending and banking industry groups regulated and fined by the CFPB poured out millions of dollars in campaign contributions, according to an analysis of the donations set to be published Wednesday by the watchdog group Accountable.US.

“These are states where supermajorities of Republican voters disapprove of payday lending and want meaningful regulation,” said Chris Peterson, a professor at the University of Utah College of Law who previously advised CFPB’s director and worked in the agency’s enforcement office. “But the attorney generals are collecting millions of dollars in campaign contributions to undermine the only serious effort to regulate payday loans. The hypocrisy is galling.” 

The groups that sued — the Community Financial Services Association of America and the Consumer Service Alliance of Texas — objected to a rule prohibiting payday lenders from saddling consumers with overdraft fees by charging people with insufficient account funds multiple times after a first transaction failed. They argued that the CFPB’s funding structure was unconstitutional and that Congress has to authorize any withdrawals of money from the Treasury Department. The Supreme Court is set to hear oral arguments in the case on October 3.

Groups regulated by the CFPB and others that supported the original suit have given at least $7.7 million to RAGA since April 2018, when industry associations first sued the agency over the automatic withdrawal rule. Since the suit was filed, payday lenders and banks regulated by the CFPB have given RAGA more than $3.2 million, and groups that filed amicus briefs supporting the suit have given RAGA more than $4.5 million, according to Accountable.US. (The CFPB, RAGA, and the Community Financial Services Association of America did not respond to requests for comment.)

In July, 26 Republican attorneys and RAGA members signed a petition asking the Supreme Court to allow them to intervene in the case on behalf of the lending industry. The court denied the petition last week. 

“As this Court has recognized before, consumer protection is the States’ traditional domain,” the Republican attorneys general wrote in their petition. “Given how the States have engaged with consumer-protection issues for so long, they have a special understanding of how an unbounded CFPB can damage the consumer-financial markets—and impair the States’ own abilities to regulate those markets.”

RAGA Goes Far Right

RAGA’s activity has grown increasingly politicized in recent years, since former President Donald Trump won office. The association pushed lawsuits friendly to industry donors and received at least $9.5 million from a group with close ties to conservative judicial activist Leonard Leo, The Guardian reported in June.

Though industry contributions given to RAGA are not staggering, races for attorney general are relatively cheap compared to the stratospheric levels of funding in some national elections — usually costing between tens of thousands and a few million dollars. The donations of nearly $8 million from payday lenders and banks also represent a significant chunk of RAGA’s annual haul. The group raised $24.8 million last year, and its Democratic counterpart raised $25.5 million. 

Major donors to RAGA since the 2018 suit against CFPB include the U.S. Chamber of Commerce Institute for Legal Reform, Bank of America, Capital One, JPMorgan Chase, Wells Fargo, Visa, Mastercard, the student loan servicer Navient, the for-profit University of Phoenix, TitleMax, and Community Choice Financial, which serves “unbanked and underbanked consumers.” INFiN, another alliance of financial services industry groups that Community Financial Services Association of America helped create in 2020, gave RAGA $40,000 last year. 

It’s anyone’s guess how the court might rule in the case, but conservative justices might consider how a decision favoring the lending industry could impact broader national policy. A ruling that CFPB’s funding structure is unconstitutional could have future implications for policy impacting other institutions with similar funding structures like the Federal Reserve Board of Governors, which sets the country’s monetary policy.

A decade ago, the argument that CFPB’s funding structure was unconstitutional might not have stood up in court, but Trump’s remaking of the federal judiciary has emboldened pro-industry groups to try their luck. 

The argument is part of a political effort to curb the federal government’s authority to regulate predatory lenders, Peterson said. “In many cases against the CFPB,” he said, “one of the things we’re seeing is that arguments that would have been dismissed as outside the mainstream 10 or 15 years ago are starting to get traction among judges recently appointed to the federal bench.”