[co-author: Stephanie Kozol]
As discussed here, on October 19, the Fifth Circuit Court of Appeals in Community Financial Services Association of America Ltd. (CFSA) v. Consumer Financial Protection Bureau (CFPB) held that the CFPB’s funding mechanism violates the appropriations clause because the CFPB does not receive its funding from annual congressional appropriations like most executive agencies, but instead, receives funding directly from the Federal Reserve based on a request by the CFPB’s director. In response, on November 15, as discussed here, the CFPB filed a petition for a writ of certiorari to the U.S. Supreme Court, requesting not only that the Court hear the case, but also that it be decided on an expedited basis during the Court’s current term. On December 15, two groups of state attorneys general, with diametrically opposed positions, filed separate amicus briefs, urging the Court to grant the CFPB’s petition and intervene to stave off the “confusion and regulatory chaos” caused by the appellate court’s decision.
Democratic AGs Brief
In their brief, 22 Democratic state attorneys general argue the Fifth Circuit erred in finding the CFPB’s funding mechanism unconstitutional but primarily focus on the sweeping remedy imposed by the Fifth Circuit. “For over a decade, the CFPB has served as a valued enforcement and regulatory partner to the [s]tates, which have historically served at the forefront of efforts to protect consumers against fraudulent and abusive practices. Amici States therefore have a compelling interest in preserving the CFPB’s authority, and its past regulatory actions, no matter how this Court resolves the parties’ dispute over the CFPB’s funding mechanism.”
They argue that the remedy ordered by the appellate court would cause irreparable harm to the states’ efforts to combat consumer fraud and abuse. Whereas, according to the Democratic attorneys general, the payday lending respondents do not claim the CFPB’s specific funding source has directly harmed them. “The mismatch between the harms identified by the court of appeals and the remedial order highlights the impropriety of the ruling. This case is not one where a court found that an agency had acted in derogation of Congress’s direction or in a manner inconsistent with express funding limitations … . Vacatur of the rule was not needed to respect the separation of powers between Congress and the Executive: the executive agency was acting entirely as Congress commanded. It was the court of appeals that stepped in to create a conflict between the branches that did not otherwise exist.”
The Democratic attorneys general conclude by asking the court to grant certiorari and confirm that an action cannot be voided simply because there was no valid appropriation.
Republican AG Brief
In their brief, 15 Republican state attorneys general attack the CFPB and its past actions, referring to the CFPB as a “failed experiment in administrative governance.” While the Republican attorneys general agree with the CFPB’s position that the country needs a fast answer to a question of this importance, they request that the Supreme Court affirm the Fifth Circuit’s decision.
“The [a]ppropriations [c]lause serves an important purpose: it allows Congress to supervise and control federal administrative agencies. Through Congress, [s]tates participate in that process, too. But when an agency like the CFPB operates outside the ordinary appropriations process, [s]tates have no opportunity to advise and influence. And unfortunately, real-world facts have shown that — freed from fear that its budget could be in danger — the CFPB has been willing to ignore Congress and the [s]tates. It evades effective oversight. Affirming the decision is therefore critical to bringing accountability and transparency to the CFPB’s work.” The Republican attorneys general further agree that the Fifth Circuit’s remedy was appropriate.
Going Forward
On November 22, the Supreme Court granted the unopposed request of CFSA for an extension until January 13, 2023 to file its brief in opposition to the CFPB’s certiorari petition. One of the reasons for the requested extension was to allow CFSA to also file a cross-petition for certiorari that same day, asking the Supreme Court to review the Fifth Circuit’s dismissal of its other challenges to the payday loan rule. The CFPB indicated it would respond to CFSA’s cross-petition on January 25 to facilitate the Supreme Court’s ability to consider both petitions at the February 17 conference.
