This morning the U.S. Supreme Court granted the Consumer Financial Protection Bureau’s (CFPB or Bureau) petition for certiorari in Community Financial Services Association of America Ltd. (CFSA) v. CFPB, a case that could decide once and for all whether the funding mechanism for the Bureau is constitutional. The order list does not specify which justices voted to take the case or their reasons for doing so. Notably, the CFSA’s cross-petition was denied, and there is no indication that the Court has agreed to the CFPB’s request to hear the case on an expedited basis during the current term.

As discussed here, on October 19, 2022, the Fifth Circuit Court of Appeals held that the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution. The Fifth Circuit based its decision on the fact that, among other things, 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 the Court decide the case on an expedited basis during the current term.

On January 13, 2023, the CFSA filed its opposition to the CFPB’s petition as well as its own cross-petition for a writ of certiorari on two antecedent questions, discussed here. In its cross-petition, the CFSA argued the Court should address two questions before even considering the Appropriations Clause issue. These being whether: 1) the CFPB Director was unconstitutionally shielded from removal at the time the rule was promulgated; and 2) issuing the Payday Lending Rule exceeded the CFPB’s authority. As stated earlier, the Supreme Court denied the CFSA’s cross-petition, meaning that only the Appropriations Clause issue will be before the court.

Our Take

We expected the Supreme Court to grant review of the Fifth Circuit’s decision, both because of the importance of the issue and because of the Court’s interest in separations of powers cases. But because it appears that the Court will not hear the case until next term, there will continue to be uncertainty related to the CFPB’s status and its ability to undertake activities such as enforcement investigations and rulemaking projects. The CFSA decision will remain binding precedent in the Fifth Circuit, and it seems likely that courts in other circuits may be presented with the issue as well, while the Supreme Court’s consideration of the issue is pending.