Amicus briefs are in on the Supreme Court’s case to rule on the CFPB’s funding structure. Here are some highlights from the dozens of briefs.
07/25/2023 10:40 A.M.
7 minute read
Support has come down on both sides in the U.S. Supreme Court case centered on the Consumer Financial Protection Bureau’s funding and regulatory authority.
This is through dozens of amicus briefs filed in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited (CFSA), slated for oral arguments before the Supreme Court Oct. 3.
As a refresher, the 5th Circuit Court of Appeals issued a ruling that the CFPB’s funding structure violates the appropriations clause in the fall of 2022 after CFSA filed suit. The CFPB appealed the decision and its petition for the Supreme Court to review the case was granted, ACA International previously reported.
The CFPB requested that the court address whether the 5th Circuit Court of Appeals erred in its ruling that the bureau’s funding structure through the Federal Reserve rather than the congressional appropriations process violates the U.S. Constitution’s separation of powers.
Congress is divided in its support. Members of the House Financial Services Committee are leading a brief in favor of CFSA and to uphold the 5th Circuit’s decision, according to a news release from Committee chair U.S. Rep. Patrick McHenry, R-N.C.
The brief (PDF), also led by U.S. Reps. Andy Barr, R-Ky., Bill Huizenga, R-Mich., and U.S. Sen. Tim Scott, R-S.C., and 132 members of Congress, states, “The [c]ourt need not determine which particular aspect of the CFPB’s funding scheme is the most problematic. This is the easy case. The CFPB ‘is in an entirely different league’ from other entities when it comes to its insulation from Congress… to the point that the CFPB currently operates as ‘a sort of junior-varsity Congress’ setting its own funding levels in perpetuity… Such insulation means that Congress itself is not determining the CFPB’s funding. The Court should affirm the judgment below, which will return the matter of the CFPB’s funding to the normal political and legislative channels, as Article I and the Appropriations Clause require.”
On the other side, House Financial Services Committee Ranking Member, U.S. Rep. Maxine Waters, D-Calif., and U.S. Sen. Sherrod Brown, D-Ohio, chair of the Senate Committee on Banking, Housing and Urban Affairs, led 144 current and former members of Congress in a brief supporting the CFPB, according to a news release.
“As the United States explains, accepting the 5th Circuit’s decision would place at risk a funding model that has been used since the early Republic, which now applies to the OCC and a host of other crucial federal programs,” the brief (PDF) states.
Additional CFPB Support
A range of support for the CFPB came in through the amicus briefs, including state and local nonprofit organizations, credit unions, the Center for Responsible Lending and consumer advocacy groups.
The organizations argue that the CFPB is not unique among federal agencies because of its funding structure and a decision that it is unconstitutional would cause disruption in the regulatory system.
In their brief (PDF), 90 organizations, including several U.S. chapters of the Public Interest Research Group Inc., the Florida Consumer Action Network, Kentucky Equal Justice, Maine Center for Economic Policy, and New Yorkers for Responsible Lending, argue “the funding architecture of the Consumer Financial Protection Bureau is neither exceptional nor exceptionable. It is echoed not only among other federal agencies but also, crucially, in dozens of state agencies around the country.”
The outcome of the case could have “significant consequences for similarly funded, essential state agencies around the nation.”
In a brief (PDF) with related arguments, regulated entities of the bureau including Community Development Financial Institutions and Credit Unions, Self-Help Credit Union, the Center for Responsible Lending, and the National Association of Latino Community Asset Builders, note the integral role the CFPB plays in the U.S. financial system and that changing its funding mechanism would cause disruption to the regulatory system they follow as well as similar financial institutions and consumers.
Support for CFSA and the Financial Services Industry
Meanwhile, in addition to the House Financial Services Committee support, industry trade groups, state attorneys general and a former CFPB director have come forward on behalf of CFSA.
West Virginia’s attorney general and 26 other states note in their brief (PDF) that the appropriations process is a vital tool for Congress to supervise federal agencies.
“The appropriations power is essential to the separation of powers, and the separation of powers in turn protects the [s]tates’ interests. Beyond that, Congress offers a forum in which [s]tates can participate more directly in the oversight and operation of administrative processes,” according to the brief. “In contrast, when an agency like the CFPB operates outside the ordinary appropriations process, it often leaves [s]tates out in the cold.”
It adds that the continued operation of the bureau outside of the appropriations process has serious consequences for the U.S. financial system.
The Credit Union National Association (CUNA) and similar organizations filed a brief supporting operating the CFPB under congressional appropriations, according to a news release.
“The broad power the CFPB wields over financial products that affect every consumer makes it especially important the bureau operate with maximum transparency and accountability,” said CUNA President/CEO Jim Nussle. “Its current structure brings it under less oversight than any other federal financial regulator, and we hope the court’s decision addresses the clear constitutional issues in the current structure, and that its decision while minimizing disruptions to the financial services marketplace as we suggest in our brief.”
One of the CFPB’s former directors, Mick Mulvaney, also filed a brief (PDF) in support of CFSA, noting the CFPB’s funding structure “deprives Congress oversight of one of the most impactful federal financial regulators.”
Mulvaney adds, “By simple virtue of the Bureau’s funding mechanism, then, it is one of the most opaque, least transparent, and potentially most abusive agencies in the federal government.”
Finally, among the briefs supporting CFSA, the U.S. Chamber of Commerce, American Bankers Association, American Financial Services Association, Consumer Bankers Association and other similar groups argue the bureau “oversteps its bounds” given its “insulation from congressional oversight.”
CUNA and the brief from the U.S. Chamber of Commerce have similar arguments to ACA’s amicus brief in that the Supreme Court should uphold the 5th Circuit’s decision on the CFPB’s funding structure but delay its judgment for six months to allow Congress time to consider options for the bureau going forward.
ACA’s brief (PDF), submitted by Brownstein Hyatt Farber Schreck, LLP, counsel Christopher Murray, supports CFSA, which filed suit against the CFPB and Director Rohit Chopra challenging the bureau’s 2017 payday lending rule on the grounds the rule is not valid because the CFPB’s funding structure is unconstitutional.
ACA’s brief addresses the question of the appropriate remedy the court may choose.
“Any changes to the ‘new normal’ since the CFPB’s inception a little more than a decade ago will impact how ACA members operate and the compliance programs and systems that they have in place in response to the [b]ureau’s rules and enforcement actions. While ACA members do not agree with many actions taken by the [b]ureau, they also benefit when there is regulatory certainty and clear requirements. ACA has an interest in ensuring that any remedy the (c)ourt imposes minimizes the disruption to markets and financial service providers, while still securing [r]espondents meaningful relief,” the brief states.
The authority to rewrite the appropriations statute to address the bureau’s funding lies solely with Congress.
Delaying a judgment from the court would allow the CFPB “to continue to exist, protecting market and institutional stability, while simultaneously allowing the political branches time to respond to—and potentially remedy, if desired—the defective financing scheme. This is not a novel approach; the [c]ourt has previously used stays to minimize the immediate impact of its rulings that otherwise would have sweeping consequences,” ACA’s brief states.
Members of Congress have already proposed several bills that would bring the bureau’s funding into the congressional appropriations process and change the leadership structure to a bipartisan commission, similar to the Federal Trade Commission and Federal Communications Commission.
If the court rules in favor of CFSA, it is critical to have Congress take the reins and for the bureau to continue to operate until they act on legislation.
Without that, the roughly 70,000 businesses across the country regulated by the bureau and consumers it serves would see significant impacts, ACA argues in the brief.
The case is set to be heard by the Supreme Court in its term beginning in October 2023. A decision is expected to be issued between December 2023 and the end of June 2024.