October 3, 2023 San Francisco: Today the Supreme Court will hear oral arguments in the case, Consumer Financial Protection Bureau v. Consumer Financial Services Association of America (CFPB v CFSA), in which payday lenders are challenging the constitutionality of the Consumer Financial Protection Bureau’s (CFPB’s) funding structure. The outcome of this case will have tremendous implications for communities across the country, as well as for the nation’s financial regulatory system. The CFPB is America’s financial protection regulator, developing rules of the road for financial companies to prevent predatory practices, filing lawsuits when laws are broken, and returning over $17.5 Billion to American consumers who have been ripped off. The CFPB shares a similar funding structure with the other key financial regulators, raising the specter of financial chaos if the Supreme Court ignores the plain language of the Constitution and legal precedent to side with the payday lenders.

“The CFPB is critical to the financial well being of all consumers in America. It is a shining light in the fight against consumer financial abuse, and against discrimination by the financial sector. Bank attacks on the CFPB are outrageous and show that, despite rhetoric to the contrary, the banking industry does not share the values of community organizations working to build wealth and financial health in their neighborhoods. It is telling that the banking trade groups are making the same arguments as the payday lenders,” said Paulina Gonzalez-Brito, CEO of Rise Economy.

Banking and allied trade groups including the American Bankers Association, the Consumer Bankers Association and the Chamber of Commerce made similar arguments in another case challenging the CFPB’s funding structure (the “Chamber” case). That case challenged the CFPB’s clarification that discrimination in a non lending context may constitute unfair and deceptive practices. The ABA and the Independent Consumer Bankers Association have also sued the CFPB to stop the Bureau’s implementation of the long awaited Section 1071 small business lending data collection rule, which will help enforce fair lending laws when discrimination against BIPOC and women owned small businesses occurs. 

Last month, Rise Economy and 100 nonprofit organizations throughout California and the nation sent a letter to 39 Bank CEOs, asking if they disagree with the damaging legal positions taken by the banking trade organizations, especially in the context of bank pronouncements regarding racial equity in the aftermath of the George Floyd murder. The letter requested that CEO recipients respond to five questions posed within 3 weeks, or by October 1. To date, only 6 banks have provided a substantive response.

The Banks responding to the community group letter include: Amalgamated Bank, Beneficial State Bank, East West Bank, HomeStreet Bank, PNC, and U.S. Bank, Capital One offered to discuss the issues contained in the letter. Morgan Stanley shared related corporate documents. A few banks informally requested more time to respond or indicated they would be responding soon. 

The clearest and most positive responses came from Beneficial State Bank CEO Randell Leach and Amalgamated Bank CEO Priscilla Sims Brown who answered each question posed regarding key community values in the affirmative: 

“1. Is it the Bank’s position that (non-credit) discrimination is unfair and deceptive? Yes.
2. Does the Bank support the existence of an independent Consumer Financial Protection Bureau, run by a Presidentially appointed and Senate confirmed Director, and with a funding source that is not subject to the political appropriations process? Yes.
3. Does the Bank support the Section 1071 Rule, which was finalized a decade after the Dodd-Frank Act authorized it, after an extensive and deliberative rulemaking process, and with several concessions to industry concerns, especially those of smaller lenders? Yes.
4. Does the Bank agree to align its lobbying and litigation activity with the goals of the Paris Agreement to limit global warming and avoid the worst consequences of climate change? Yes.
5. Does/will the Bank structure its lobbying and litigation policies and procedures so that the CRA, community affairs, and ESG functions of the bank are given the opportunity to provide meaningful input on policy matters impacting LMI communities of color before lobbying or litigation decisions are made? Yes.”

East West Bank indicated, “We seek to avoid political lobbying and litigation and just focus on doing the best we can for our customers….   In all our discussions with political leaders and in litigation, the impact on persons of color, and especially in LMI and immigrant communities, is an important consideration. This is part of our mission.”   

PNC, after sharing some of its policies and approaches, responded to questions posed by noting: “For example, although we may differ on some of the details, we support the climate risk management guidance issued by the banking agencies, the modernization of the CRA, and the implementation of the small business reporting requirements of Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). In addition, we support the existence of a dedicated agency – the Consumer Financial Protection Bureau – to be responsible for the administration, enforcement, and implementation of U.S. consumer financial laws with respect to both banking organizations and nonbank financial firms.”

HomeStreet Bank CEO Mark Mason noted, “Consistent with the Dodd-Frank Act, we are in support of the Consumer Financial Protection Bureau as it was constitutionally created to protect the customers who trust us with their investments and finances. We support strong protections for consumers, with clear and comprehensive rulemaking and consistent enforcement, as they ensure a level playing field for institutions that follow the rules and treat consumers with fairness and equity.”

U.S. Bank sent a letter that shared links to its reports on community and ESG performance, though it did not respond directly to questions posed.

Rise Economy and the other 100 organizations endorsing the letter await further responses from other banks, and will be watching the Supreme Court case closely. Rise Economy decries damaging lobbying and litigation practices embraced by banking organizations, especially so if they do not reflect the perspectives of banks that may be working to build wealth in all communities and to honor anti discrimination, consumer protection and just climate transition principles. 

The community group letter was sent to the following banks:

  1. Amalgamated Bank
  2. Bank of America
  3. Bank of California
  4. Bank of Hope
  5. Beneficial State Bank
  6. BMO Harris 
  7. California Bank and Trust
  8. Capital One Financial Group
  9. Cathay Bank
  10. Charles Schwab Bank
  11. Citibank
  12. Citizens Business Bank
  13. City National Bank
  14. Comerica Bank
  15. Communit Bank of the Bay
  16. East West Bank
  17. First Citizens Bank
  18. Frost Bank
  19. Flagstar Bank
  20. Goldman Sachs
  21. Heritage Bank
  22. HomeStreet Bank
  23. HSBC
  24. JPMorgan Chase 
  25. Lending Club
  26. Luther Burbank Savings
  27. Mechanics Banks
  28. Morgan Stanley
  29. Pacific Premier Bank
  30. Pacific Western Bank
  31. PNC Bank
  32. SoFi Bank 
  33. Square Financial Services 
  34. Tri Counties Bank 
  35. Umpqua Bank
  36. U.S. Bank 
  37. Washington Federal Bank 
  38. Wells Fargo 
  39. Zions Bank