Big changes to injunctions and what they mean for your compliance team

You probably think the Supreme Court’s big ruling (Trump v. Casa, Inc.) on birthright citizenship injunctions has zero to do with your bank or financial institution. Think again. Because buried in that decision is a game-changing limitation on how courts can block government rules nationwide, and that shift affects key financial regulations, too.

Before we dive in, a quick note: While the ruling came from a high-profile case involving immigration policy, this article focuses squarely on the legal doctrine around injunctions and how it applies to federal agency enforcement. The political debate over birthright citizenship is outside our scope here. Instead, we’re looking at what the ruling means for financial institutions navigating injunctions on regulatory rules.

What are nationwide injunctions, and why do they matter?

A nationwide injunction is a court order that prevents a federal agency or the government from enforcing a law or regulation across the entire country, not just against the parties in the lawsuit. These injunctions have become common tools to quickly stop new rules from taking effect, especially when multiple lawsuits are filed in different courts challenging the same regulation.

Financial institutions are no strangers to these. Nationwide injunctions have halted enforcement of several CFPB rules and other agency actions, creating a patchwork of enforcement and compliance uncertainties.

However, nationwide injunctions have critics. Opponents say they give too much power to a single judge in one district to block policies for the whole country, leading to forum shopping and inconsistent legal standards. The Supreme Court’s recent ruling puts a big dent in that practice.

The Supreme Court’s new rule on injunction scope

In a 6–3 decision, the Court made clear that courts should not issue injunctions broader than necessary to provide relief to the actual parties before them. This means no more sweeping nationwide injunctions unless the plaintiffs represent a properly certified class that includes all those who would be covered by the relief.

The ruling does not ban injunctions altogether, just those that apply universally without tying relief to the parties involved. This is a major shift away from past practice, where nationwide injunctions were common.

Regulatory injunctions that already comply

The Supreme Court’s new limit on nationwide injunctions is unlikely to affect several current regulatory enforcement actions because those injunctions are already tailored to the parties involved. In cases challenging rules like the Credit Card Late Fee Cap Rule and the Medical Debt Credit Reporting Rule, courts have issued relief that applies only to the specific plaintiff organizations and their members.

For example, in the credit card late fee case, the injunction protects the named trade associations (including the ABA and ICBA) and their member financial institutions from enforcement, but does not block the rule for the industry at large. Similarly, the medical debt rule has been paused only for the plaintiffs in the case, such as the Consumer Data Industry Association and others, and not for all credit reporting entities.

Because these injunctions are already limited in reach, they comply with the Supreme Court’s new standard and are unlikely to require modification in response to the ruling.

The Section 1071 rule injunction: A special case

The injunction blocking the CFPB’s Section 1071 small business lending rule is the big exception and the most interesting test case under this new legal standard.

Unlike the others, this injunction is nationwide, preventing enforcement against all covered lenders across the country. But the Supreme Court’s ruling does not automatically shrink this injunction to just the plaintiffs.

Here’s what you need to know:

• It’s not automatically narrowed: The injunction remains nationwide until a court order changes it.
• CFPB can request narrowing: The CFPB now has a strong legal argument to ask the Court to limit the injunction only to the named plaintiffs, in line with the Supreme Court ruling.
• Courts can narrow it sua sponte: The district court could decide on its own to reduce the injunction’s scope without waiting for a motion.
• Plaintiffs can seek class certification: To preserve a nationwide injunction, the plaintiffs may attempt to certify a class of all covered lenders. A certified class would allow a broad injunction consistent with the new ruling.

This means the nationwide injunction against the 1071 rule is in a state of flux, and compliance officers should watch for developments closely.

What this means going forward

The Supreme Court’s decision signals a new era where nationwide injunctions are the exception, not the rule. Agencies and regulated parties will have to rethink litigation strategies, and courts will focus on case-specific relief.

For financial institutions, this means some regulatory injunctions will narrow in scope while others remain as is pending court action. The 1071 rule injunction is the bellwether; how courts handle it will shape future regulatory enforcement nationwide.

Expect a period of uncertainty as courts, agencies, and litigants adjust. Staying informed and flexible will be key to navigating these shifting legal waters.

While the headline-grabbing birthright citizenship injunction may feel distant from banking halls, the Supreme Court’s ruling on nationwide injunctions has immediate and significant implications for financial regulatory enforcement. It limits how broadly courts can block agency rules and sets new legal standards for injunction scope.

Financial institutions should watch how this plays out with injunctions like the CFPB’s Section 1071 rule, which remains a pivotal battleground. The landscape of regulatory injunctions is evolving, and staying ahead means understanding both the legal doctrine and the practical enforcement realities.