Motion for Preliminary Injunction

On December 12, 2024, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued its rule titled Overdraft Lending: Very Large Financial Institutions (“Rule” or “Final Rule”), which overturns 55 years of precedent to subject discretionary overdraft services to the Truth in Lending Act’s (“TILA”) Regulation Z. The Rule classifies discretionary overdraft services offered by “Very Large Financial Institutions” (“VLFIs”) (financial institutions with more than $10 billion in assets) as “credit.” Although the CFPB’s public statements portray the Rule as merely requiring that VLFIs “[d]isclose the terms of their overdraft loan just like other loans,” in reality, the Rule restricts the fees VLFIs may charge for these services and dictates the features of overdraft services that exceed either $5 or a misnamed “breakeven” calculation that undercounts the actual cost of offering discretionary overdraft services. See (Compl. ¶¶ 63–65.) An injunction is warranted pending the Court’s review of the Rule’s legality because the CFPB lacks authority, under TILA or any other statute, to issue the Rule, and because the Rule poses a substantial threat of irreparable harm to Plaintiffs and, as applicable, their members and the consumers they serve.

The CFPB’s Final Rule subjects discretionary overdraft services to a new and complex substantive regime and reverses 55 years of consistent interpretation of TILA by the agencies charged with enforcing it. For over 40 years, the Board of Governors of the Federal Reserve System (“Board”) consistently interpreted TILA to conclude that discretionary overdraft services lack the hallmarks of a credit transaction as defined by the statute and are excluded from the credit disclosure requirements of TILA because consumers have no right to overdraw their account or defer repayment. That interpretation remained in place for the next 14 years after Congress transferred regulatory authority from the Board to the CFPB.

The CFPB’s reinterpretation of TILA and Regulation Z cannot be reconciled with the language or design of the statute. The CFPB lacks the authority to regulate discretionary overdraft services under TILA because these services, as the Board concluded, fall outside TILA’s definitions of “credit” and “finance charge.” Further, TILA is a disclosure statute; it does not regulate the substantive terms of consumer credit offerings. Yet the CFPB’s Final Rule goes far beyond mandating disclosures; the Rule significantly alters the terms by which VLFIs can offer discretionary overdraft services, with far-reaching consequences for the over one in four households that use discretionary overdraft services annually. Because the CFPB lacks statutory authority to issue the Final Rule, Plaintiffs have a high likelihood of success on the merits of their legal challenge, thereby satisfying the first of two main requirements for a preliminary injunction. The second main requirement—substantial threat of irreparable injury—is also satisfied. The attached declarations from Plaintiffs and, as applicable, their members attest to the costs financial institutions must incur now if they are to comply with the Final Rule, whose effective date is October 1, 2025. These costs cannot be recovered if the Rule is found to exceed the CFPB’s authority under TILA. Plaintiffs likewise meet the third and fourth requirements—harm to the opposing party and to the public—as the CFPB will not be harmed by a delay, nor will the public be injured by entry of a preliminary injunction that maintains the status quo as it has existed for more than 55 years. The Court should grant Plaintiffs’ motion for a preliminary injunction.

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