Consumer Financial Protection Bureau
Consumer Financial Protection Bureau v. Community Financial Services Association
Date: July 10, 2023
Issue: Whether the Consumer Financial Protection Bureau (CFPB)’s funding structure violates the Appropriations Clause of the U.S. Constitution.
Case Summary: ABA and a group of trades (Amici) filed an amicus brief urging the U.S. Supreme Court to rule CFPB’s funding structure is unconstitutional.
The Community Financial Services Association (CFSA) sued CFPB over its final rule on short-term loans and challenged its payday lending rule which requires lenders to evaluate whether borrowers can repay loans. 12 CFR Part 1041. CFSA argued CFPB overstepped constitutional grounds, the rule was fundamentally flawed, and the rule derived from unconstitutionally concentrated power within CFPB. A federal court denied CFSA’s motion for summary judgment, ruling CFPB’s ability to fund itself outside the regular congressional budget did not infringe on the power given to Congress by the Constitution’s Appropriation Clause.
On appeal, a Fifth Circuit panel unanimously reversed, ruling CFPB’s funding structure is unconstitutional. The panel opined Congress’s decision to abdicate its appropriations power under the Constitution by ceding its power of the purse to CFPB violates the Constitution’s structural separation of powers. The Supreme Court granted CFPB’s certiorari petition on Feb. 27, 2023.
Amici filed its amicus brief supporting CFSA, making two main arguments. First, Amici argued CFPB’s funding mechanism violates the Constitution’s structural protections embodied in the separation of powers and the Appropriations Clause. Amici emphasized the Fifth Circuit’s decision is correct because CFPB promulgated its rule in violation of the Appropriations Clause without any legislative action to cure the constitutional defect. Accordingly, Amici contended the Fifth Circuit correctly vacated the rule. In addition, Amici asserted CFPB’s short history confirms the importance of constitutional safeguards. Amici highlighted CFPB has a history of overreach to the detriment of the industry and consumers.
Second, Amici urged the Court to affirm the Fifth Circuit while providing targeted and meaningful relief for the industry. Amici emphasized CFPB is an agency like no other, and its funding mechanism and vast authority make it unique. Amici explained CFPB’s unmatched powers and reach, alongside its level of budgetary independence, warrant funding accountability tailored to the Bureau’s unique structure. The brief emphasized the Court can mitigate disruptions in the marketplace by crafting a narrow remedy. Amici urged the Court to sever the unconstitutional funding mechanism, leaving the rest of CFPB’s enabling act in place. Congress, subsequent to the proposed action, could fund CFPB in a constitutionally appropriate matter, according to Amici.
Bottom Line: Oral arguments are scheduled for Oct. 3, 2023.