Case 1:18-cv LY Document 45 Filed 09/19/18 Page 1 of 11 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS AUSTIN DIVISION

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1 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 1 of 11 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS AUSTIN DIVISION COMMUNITY FINANCIAL SERVICES ASSOCIATION OF AMERICA, LTD., and CONSUMER SERVICE ALLIANCE OF TEXAS, v. Plaintiffs, CONSUMER FINANCIAL PROTECTION BUREAU and JOHN MICHAEL MULVANEY, Civil Action No. 1:18-cv-295-LY Defendants. MOTION BY COOPERATIVE BAPTIST FELLOWSHIP TO INTERVENE AS DEFENDANT Cooperative Baptist Fellowship (CBF) moves to intervene as a defendant under Federal Rule of Civil Procedure 24. CBF s application is timely, it has protectable interests in the subject matter of this action, and its ability to protect those interests could be impaired or impeded by this action s disposition. Further, no other party adequately represents CBF s interests; defendants have already taken litigation positions adverse to those interests. Thus, CBF is entitled to intervention as of right under Rule 24(a)(2). In the alternative, this Court should permit intervention under Rule 24(b)(1)(B). An answer accompanies this motion. Plaintiffs oppose this motion; defendants have stated that they cannot provide their position on the motion until they see it. BACKGROUND I. The Consumer Financial Protection Bureau s Payday Rule In October 2017, the Consumer Financial Protection Bureau (Bureau) issued a rule to provide protections for consumers who take out payday loans, vehicle-title loans, and other similar loans. See Bureau, CFPB Finalizes Rule to Stop Payday Debt Traps (Oct. 5, 2017), 1

2 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 2 of 11 consumerfinance.gov/about-us/newsroom/cfpb-finalizes-rule-stop-payday-debt-traps/. Principally, the Bureau was concerned that lenders of the covered short-term loans fail[] to assess consumers ability to repay their loans according to their terms and engag[e] in harmful practices in the course of seeking to withdraw payments from consumers accounts. 82 Fed. Reg. 54,472, 54,472 (Nov. 17, 2017). Many consumers, the agency concluded, struggle to repay unaffordable loans and in doing so suffer a variety of adverse consequences. Id. In issuing the rule, commonly referred to as the Payday Rule, the Bureau emphasized that consumers who lack the ability to repay covered short-term loans, such as payday or vehicle-title loans, face one of three options when an unaffordable loan payment is due: Take out additional covered loans ( re-borrow ), default on the covered loan, or make the payment on the covered loan and fail to meet basic living expenses or other major financial obligations. Id. The first option, re-borrowing, creates a loan sequence : an initial loan plus subsequent loans taken out within 30 days of the earlier loan s repayment. Id. at 54, In the relevant markets, a substantial population of consumers ends up in extended loan sequences of unaffordable loans. Id. at 54,472. Because re-borrowing triggers fees, these sequences can mean that borrowers incur borrowing costs that are several times higher than what they expected to pay. Id. at 54,835. [S]imilar risks, the Bureau concluded, are associated with longer-term balloon-payment loans. Id. at 54,472. The Bureau also focused on lenders attempts to obtain repayment of covered loans directly from consumers accounts. Id. It was concerned that consumers may be subject to multiple fees and other harms when lenders make repeated unsuccessful attempts to withdraw funds from their accounts. Id. 1 Re-borrowing includes extending the due date of a loan in exchange for a new fee ( rollover ) and repaying a loan and taking out a new one on the same day ( back-to-back loans ) or within 30 days of repayment. See 82 Fed. Reg. at 54,478, 54,484. 2

3 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 3 of 11 To address the Bureau s concerns, the Payday Rule identifies and prohibits (with certain exceptions) two unfair and abusive practices: (1) mak[ing] covered short-term loans or covered longer-term balloon payment loans without reasonably determining that the consumers will have the ability to repay the loans according to their terms, 12 C.F.R , and (2) mak[ing] attempts to withdraw payment from consumers accounts in connection with a covered loan, absent authorization, after two prior attempts failed due to lack of funds, id See id , , The Rule also limits the length of certain loan sequences, requires that lenders structure certain loan sequences so that the principal decreases over time, id (d)(2), (b)-(d), and sets out other consumer protection requirements for lenders. The Payday Rule became effective on January 16, 2018; the compliance date for most parts is August 19, Fed. Reg. at 54,472. When implemented, the Rule will benefit consumers by reducing the harm they suffer from the costs of extended sequences of payday loans and singlepayment [vehicle]-title loans, from the costs of delinquency and default on these loans, from the costs of defaulting on other major financial obligations, and/or from being unable to cover basic living expenses in order to pay off covered short-term and longer-term balloon-payment loans. Id. at 54,835. The Payday Rule will also benefit consumers by reducing the fees they are charged and other harms they suffer from lenders unsuccessful attempts to withdraw funds from their accounts. Id. at 54, II. Cooperative Baptist Fellowship Movant CBF is a Baptist organization that pursues its religious goals through the directservice, mission work of its field personnel around the world and through ministry engaging with, supporting, and collaborating with affiliated churches to pursue their shared vision. Because of its focus on promoting economic development and reducing poverty, CBF has worked for years 3

4 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 4 of 11 to address the harmful aspects of payday and vehicle-title loans. App. 1-2 (Paynter Decl.) 2, 4-7. Spurred to action after CBF churches and ministers saw the effects of payday and vehicletitle loans in their communities, CBF concluded that industry practices conflict with its religious values and economic development goals. CBF was especially concerned that payday and vehicletitle-lending practices trap consumers in cycles of unaffordable debt. Concluding that these cycles and other injuries limit individuals ability to build their own capacity, CBF developed mission and ministry efforts to help borrowers in distress and combat harmful lending practices. Id. at 2-4 (Paynter Decl.) 7-12; id. at 8 (Jasper Decl.) 8. One way in which CBF addresses the harmful aspects of payday loans is through the direct service of CBF field employee Scarlette Jasper. Working in poor, rural Kentucky communities where payday loans are prevalent, Ms. Jasper promotes economic development through a variety of measures, including by providing financial education to individuals. Id. at 3 (Paynter Decl.) 9; id. at 7-8 (Jasper Decl.) 2-6. A substantial number of the individuals whom Ms. Jasper serves face financial crises caused by payday loans that they cannot afford to repay. Individual financial education is time-intensive, and financial education for individuals who are in payday-loan crises takes even more time, because Ms. Jasper helps those individuals figure out how to pay off their debts, in addition to teaching them sustainable financial management skills. Because financial education for payday borrowers in crisis requires extra time, it reduces Ms. Jasper s available time for other economic development activities. Id. at 8-9 (Jasper Decl.) CBF also combats harmful payday- and vehicle-title-loan practices through its ministry. It educates congregations about financial education efforts (like Ms. Jasper s) and low-cost loan programs that they can establish to help individuals avoid or get out of payday- or vehicle-title- 4

5 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 5 of 11 loan debt. Id. at 1-2, 3 (Paynter Decl.) 4, 10. Additionally, since 2013, CBF has advocated for legal reform. In particular, CBF spent years pressing the Bureau to adopt strong limits on predatory payday- and vehicle-title-loan practices. As part of its advocacy campaign for what became the Payday Rule, CBF testified at a Bureau hearing, repeatedly met with Bureau staff, organized pastors and church members to similarly engage with the agency and with members of Congress, commented on the proposed rule, and encouraged others to do the same. Id. at 3-4 (Paynter Decl.) CBF s advocacy in support of the Rule has continued since October 2017, when the Rule was released, as members of Congress and the Bureau have threatened to undo its protections. Id. at 4 (Paynter Decl.) 14. Separately, CBF has urged Congress to cap payday- and vehicle-titleloan interest-rates and encouraged and supported CBF affiliates state-level advocacy against harmful lending practices. Id. at 3 (Paynter Decl.) 11. ARGUMENT I. The Court should grant CBF intervention as of right. A party is entitled to intervene if it files a timely motion and shows that it has an interest in the proceeding, that disposition of the action threatens to impair or impede the movant s ability to protect that interest, and that the existing parties may not adequately represent it. See Fed. R. Civ. P. 24(a)(2). Rule 24 is to be liberally construed, with doubts resolved in favor of the proposed intervenor. Entergy Gulf States La., LLC v. U.S. EPA, 817 F.3d 198, 203 (5th Cir. 2016) (internal quotation marks omitted). CBF easily satisfies the Rule 24(a)(2) requirements. A. This motion is timely. This motion to intervene is timely. The litigation is at an early stage, and the Bureau defendants have not yet filed an answer. Although the case was filed in April, the litigation has been stayed (Dkts. 29, 39), and plaintiffs motion to lift the stay (Dkt. 40) and proposed motion 5

6 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 6 of 11 for a preliminary injunction (Dkt. 42) were filed only days ago. Accordingly, intervention by CBF will not prejudice the existing parties. Moreover, defendants have moved for an extension of time within which to file a response to plaintiffs motion for a preliminary injunction, and CBF will file its opposition to the preliminary injunction motion on the schedule entered by the Court. B. CBF has protectable interests in this case. Under Rule 24(a)(2), a proposed intervenor s interest in the subject of the action is sufficient to justify intervention if it is of the type that the law deems worthy of protection, even if the intervenor does not have an enforceable legal entitlement or would not have standing to pursue her own claim. Wal-Mart Stores, Inc. v. Tex. Alcoholic Beverage Comm n, 834 F.3d 562, 566 (5th Cir. 2016). [T]he inquiry turns on whether the intervenor has a stake in the matter that goes beyond a generalized preference that the case come out a certain way. Texas v. United States, 805 F.3d 653, 657 (5th Cir. 2015). Here, CBF has several protectable interests in the Payday Rule, and indeed standing to defend it. First, CBF has an interest because in the Rule s absence, CBF devotes its limited resources to counteracting harmful lending practices that conflict with CBF s values and goals. See App. 2-5 (Paynter Decl.) 7-12, 14, When the Rule is implemented, however, the Rule will restrict these practices and reduce the harms they cause. As a result, CBF will be able to reduce its payday- and vehicle-title-loan efforts and shift its resources to other mission pursuits. Because the Payday Rule s implementation thus affects CBF s mission, resources, and daily work, CBF has an interest sufficient to support intervention as of right. Cf. OCA-Greater Hous. v. Texas, 867 F.3d 604, (5th Cir. 2017) (holding that a nonprofit voter-outreach and civic education organization suffered injury-in-fact when it went out of its way to counteract the effect of [a challenged law] and thus the law perceptibly impaired [its] ability to get out the vote ); Scott 6

7 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 7 of 11 v. Schedler, 771 F.3d 831, 837 (5th Cir. 2014) (holding that an organization had standing when it spent time and thus devoted resources to counteract allegedly unlawful practices ). For example, CBF employee Ms. Jasper spends extra time offering financial education to borrowers who are in crisis because they received payday loans that they could not afford, repeatedly re-borrowed (sometimes, with increasing loan amounts), and in some cases, were charged extra fees after lenders made unsuccessful attempts to withdraw money from their accounts. App. 8-9 (Jasper Decl.) 8-9. The Payday Rule will restrict the lending practices that lead borrowers into these crisis situations, however, by limiting loans to consumers who cannot afford them, see 12 C.F.R ; eliminat[ing] long sequences of loans, 82 Fed. Reg. at 54,835; requiring, for certain loan sequences, that lenders reduce (rather than increase) the principal over time, see 12 C.F.R (b); and restricting lenders repeated, unsuccessful attempts to withdraw money from borrowers accounts, see id (b). As a result, fewer individuals will need Ms. Jasper s help for payday-loan crises after the Rule is implemented. See App. 4-5 (Paynter Decl.) 15-17; id. at 9 (Jasper Decl.) 10. With less of her time needed to help payday borrowers in distress, Ms. Jasper will be able to pursue other CBF work, by conducting more group financial education workshops and helping illiterate domestic abuse victims move toward self-sufficiency. Id. at 5 (Paynter Decl.) 17; id. at 9 (Jasper Decl.) 11. The Payday Rule s implementation will also enable CBF to reduce its congregational engagement and advocacy efforts regarding payday and vehicle-title loans, and to devote more resources to ministry initiatives in two other areas that are important to CBF: racial justice and criminal justice reform. Similarly to the change in Ms. Jasper s work, this additional shift in CBF s resources will be possible because the Payday Rule substantially addresses the harmful paydayand vehicle-title-loan practices that concern CBF. Id. at 4-5 (Paynter Decl.) 13, 15-16, 18. 7

8 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 8 of 11 Second, CBF developed an extensive campaign to urge the Bureau to adopt a payday-loan rule and continues to advocate (not only in this Court) for the Rule s implementation. See App. 3-4 (Paynter Decl.) 11-12, 14. Because of CBF s focused efforts and the resources it spent advocating for the Rule it now seeks to defend, CBF has an additional interest that supports intervention. See City of Hous. v. Am. Traffic Sols., Inc., 668 F.3d 291, 294 (5th Cir. 2012) (authorizing intervention by citizens who spent time and money advocating for the city charter amendment at issue); see also W. Energy All. v. Zinke, 877 F.3d 1157, 1165, 1167 (10th Cir. 2017) (similar). C. This action may impair or impede CBF s interests. In this action, plaintiffs ask the Court to set aside the Rule. Additionally, by challenging the constitutionality of the Bureau s authority, they seek a ruling that could limit the agency s ability to correct any defects on remand. See Compl. (Dkt. 1) In light of CBF s activities and mission, as discussed above, both the challenge to the Rule and the challenge to the CFPB s authority itself may as a practical matter impair or impede the movant s ability to protect its interest[s]. Fed. R. Civ. P. 24(a)(2); see Brumfield v. Dodd, 749 F.3d 339, 344 (5th Cir. 2014) (Rule 24(a)(2) satisfied by showing that movants interests might be impaired ). D. Defendants do not adequately represent CBF s interests. CBF easily satisfies the minimal showing of inadequate representation that Rule 24(a)(2) requires. Entergy, 817 F.3d at 203. The prior filings in this litigation make clear that CBF s interests diverge from defendants in important ways. Texas, 805 F.3d at 662. CBF seeks the timely and full implementation of the Payday Rule. App. 4 (Paynter Decl.) 14. In contrast, defendants have indicated that they want to delay and change it. They have sought a years long delay of the Rule s compliance date, announced plans to reconsider the Rule, and additionally 8

9 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 9 of 11 suggested that they do not support the Rule, by stating that plaintiffs have a substantial case on the merits of their claims challenging it. See Joint Mot. for Stay (Dkt. 16) 4-5, 9-12; Resp. in Supp. of Pls. Mot. for Recons. (Dkt. 34) at 6-7, Further, the conflicts between CBF s and defendants interests are germane to the case. Texas, 805 F.3d at 662. Based on its interests, CBF would vigorously oppose all of plaintiffs claims and plaintiffs motion for a preliminary injunction, including by emphasizing the important benefits the Payday Rule will provide to consumers. App. 5 (Paynter Decl.) 19. By contrast, defendants have shown a willingness to support the merits of plaintiffs claims and discount the Rule s benefits. See Resp. in Support of Pls. Mot. for Recons. (Dkt. 34) at 10-15, 19. Further, defendants appear likely to support plaintiffs preliminary injunction motion, at least in part, as they have asserted that this case satisfied the test for a stay pending appeal, id. at 9-19 a test that overlaps with the preliminary injunction test, Nken v. Holder, 556 U.S. 418, 434 (2009). 2 Thus, even at this early stage in litigation, the adversity of interest between CBF and defendants is apparent. Texas, 805 F.3d at 662; see id. at (allowing intervention when defendants took a legal position adverse to the interests of defendant-intervenors); Brumfield, 749 F.3d at 346 (finding the test for intervention satisfied when there is a lack of unity in all objectives, combined with real and legitimate additional or contrary arguments ); City of Hous., 668 F.3d at 294 (finding test for intervention satisfied where due to the city s interests, [w]ithout intervenors participation, the City might well be inclined to settle the litigation on terms that preserve the adverse ruling on a measure that the intervenors supported). The Court should therefore grant this motion for intervention as of right. 2 Plaintiffs Motion for Preliminary Injunction (Dkt. 42 at 1 n.1) further signals that defendants are likely to support plaintiffs arguments, at least in part; the motion notes defendants position that they could not take a position on that motion before reading it. 9

10 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 10 of 11 II. In the alternative, the Court should grant permissive intervention. Alternatively, the Court should permit CBF to intervene under Federal Rule of Civil Procedure 24(b)(1)(B), which permits intervention where the motion is timely, the movant has a claim or defense that shares with the main action a common question of law or fact, and intervention will not unduly delay or prejudice the adjudication of the original parties rights. Fed. R. Civ. P. 24(b)(1), (b)(1)(b), (b)(3). CBF satisfies these requirements. First, as described above, its motion is timely. Second, CBF seeks to defend the Payday Rule from plaintiffs challenge. Third, at this early stage in litigation, intervention will not delay resolution of the case or prejudice the existing parties. Therefore, if the Court does not grant intervention as of right under Rule 24(a)(2), it should grant permissive intervention under Rule 24(b)(1)(B). CONCLUSION For the foregoing reasons, the Court should grant CBF s motion to intervene. Dated: September 19, 2018 Respectfully submitted, /s/ Rebecca Smullin Rebecca Smullin (DC Bar No ) (admitted pro hac vice) Public Citizen Litigation Group th Street NW Washington, DC (202) rsmullin@citizen.org Aaron Johnson (TX Bar No ) Equal Justice Center 510 S. Congress Avenue, Suite 206 Austin, Texas (512) Fax: (512) ajohnson@equaljusticecenter.org Counsel for Cooperative Baptist Fellowship 10

11 Case 1:18-cv LY Document 45 Filed 09/19/18 Page 11 of 11 CERTIFICATE OF SERVICE I hereby certify that on September 19, 2018, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send notification of such filing to counsel for all parties. /s/ Rebecca Smullin Rebecca Smullin 11