Market updates and sector developments

The US Supreme Court has issued its decision in the ‘Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd’ case, holding that the CFPB's funding mechanism - as set forth in Title X of the Dodd-Frank Act - is constitutional. In evaluating the CFPB's funding structure against the Constitution's requirements, the Court found that the agency's appropriation mechanism is constitutionally permissible, given that it includes an identifiable source of public money and a designated purpose.

The case arises from a challenge by the Community Financial Services Association of America (CFSA), a non-bank consumer lender trade association, related to certain provisions in final rules adopted by the CFPB related to consumer payment authorisations on higher interest, short-term consumer lending products (SCI 4 November 2022). In its challenge to the CFPB's adoption of the Payday Rule, the CFSA raised a number of arguments, including one that challenged the CFPB's funding mechanism as violative of the Appropriations Cause.

In a client memo, Katten Muchin Rosenman notes that cases that were stayed pending the Supreme Court's decision in this case will now become actively litigated. This includes the payment authorisation provisions at the heart of the CFSA case, as well as other cases that have been stayed or had injunctions issued based upon the Fifth Circuit decision.

“Although it appears that many avenues to challenge the Dodd-Frank Act's statutory provisions as they relate to the creation and administration of the CFPB have now been assessed by the Supreme Court and found to be constitutional, there are still other avenues available to individuals or entities that have bases for challenging the CFPB's actions. For example, as is true in the underlying CFSA case, the facts at issue may support challenges raised in connection with a potential violation of the federal Administrative Procedures Act - whereby federal agency actions can be set aside if they are found to be arbitrary, capricious, an abuse of discretion or ‘otherwise not in accordance with law’,” the memo states.

With this decision, the CFPB is also expected to reignite its enforcement actions, which had likely been limited given this open Constitutional question.

In other news…

Solar forward flow agreement inked
Carlyle has entered into a US$450m forward flow agreement to purchase newly issued residential solar loans from Sungage Financial. In addition, Carlyle made a strategic investment into Sungage Financial, enabling the firm to increase its origination capacity and drive future growth.

Founded in early 2011, Sungage launched the nation’s first asset-backed solar loan designed specifically for residential projects. Today, the firm offers reliable and flexible online financing solutions with low monthly payments available for solar, roof and battery loans. 

The transaction was led by Carlyle’s credit strategic solutions (CSS) team, a group within its global credit business focused on private fixed income and asset-backed investments. The team leverages the knowledge, sourcing, structuring and breadth of the entire Carlyle investment platform to deliver tailored asset-focused financing solutions to businesses, specialty finance companies, banks, asset managers and other originators and owners of diversified pools of assets.

CSS has deployed more than US$3.5bn since 2021 and has roughly US$7bn in assets under management, as of 31 March 2024. 

Corinne Smith