Briefs Pour in as the CFPB’s Fate Hangs By a Thread
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Briefs Pour in as the CFPB’s Fate Hangs By a Thread

Brownstein Client Alert, July 26, 2023

On July 14, 2023, the U.S. Supreme Court announced it would hear oral arguments in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA) on October 3, 2023. The court will review the Fifth Circuit’s decision to vacate a CFPB regulation on the basis that the CFPB operates in violation of the Constitution’s Appropriations Clause given that its funding is not approved by Congress. Instead, the CFPB’s funding is provided by the Federal Reserve System—a point the respondents argue inappropriately insulates the bureau from congressional oversight and scrutiny. Along with the case’s parties, amici curiae (friends of the court) have filed brief on both the merits and nature of potential remedies. Several of these briefs are notable for their arguments targeting the constitutionality of the CFPB and their proposed remedy.

State of West Virginia and 26 Other States

Led by West Virginia, 27 states filed a brief supporting the Fifth Circuit’s decision to hold the CFPB’s funding regime as unconstitutional and strike down the regulation in question. The states called the constitutional question an “easy one” and referred to the clear text of the Appropriations Clause, that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” In their unique position as sovereigns, the states make the argument that the Appropriations Clause is more than a power delegated to Congress; it is a carefully designed mechanism by which Congress regulates the executive and maintains the constitutional order, thereby protecting the power and independence of state governments as well. As for the remedy for the CFPB’s alleged constitutional deficiency—vacating the CFPB’s regulations and enforcement by virtue of the impermissible funding scheme—the states urge the court to “ignore doomsaying about the consequences of providing relief.” The states see themselves as ready to fill any enforcement or regulatory gap.

132 Members of Congress

One-hundred and thirty-two Republican members of Congress filed a brief supporting the Fifth Circuit’s decision. While noting similar constitutional objections to other briefs, the members specifically described the legislative limitations associated with attempts to restrict CFPB funding in the current system. Any change to the CFPB’s funding would need to come from an amendment to Dodd-Frank, which would face a certain veto. Thus, any congressional limitation on the CFPB’s funding is subject to the heightened two-thirds veto-proof standard. The members argue that this funding regime was not a mistake. Instead, it was “designed to insulate the agency as much as possible from Congress’s ordinary appropriations processes.”

Credit Union National Association, National Association of Federally-Insured Credit Unions and American Association of Credit Union Leagues

Representing thousands of credit unions, Brownstein with the Credit Union National Association (CUNA), National Association of Federally-Insured Credit Unions (NAFCU) and the American Association of Credit Union Leagues (AACUL) argue that the CFPB’s funding structure is impermissible and the regulation is duplicative given other regulatory agencies such as the National Credit Union Administration (NCUA). The groups also push back against the argument that the CFPB’s unusual funding is the equivalent of other unusually funded agencies, again like the NCUA. But as the credit unions note, while the NCUA and other similarly structured agencies like the Federal Deposit Insurance Corporation rely on voluntary members paying fees, the CFPB’s funding is required to flow from one independent agency to another—without congressional accountability or voluntary member choice. The credit unions are careful to note that the power to remedy this constitutional deficiency belongs to Congress, not the court, and cannot be severed from the broader grant of CFPB authority. In other words, the credit unions argue that the funding structure is far too intricately tied to the regulatory and enforcement mechanisms of the CFPB to eliminate only the funding structure. The court has no choice but to sideline the entire agency if its funding mechanism is in fact unlawful, leaving only Congress the power to make any changes. Importantly, the credit unions also urge the court to stay its ruling for three to six months to “minimize the disruption from its constitutional holding.”

ACA International

Brownstein on behalf of ACA International asked the Court to affirm the Fifth Circuit and rule the CFPB and its funding structure unconstitutional. The brief explains that ACA has a strong interest in this case because the CFPB is the first federal agency with rule-writing authority for the Fair Debt Collection Practices Act, the law governing the collections industry, and it recently issued rules amending Regulation F that made massive changes to the operations and compliance programs for businesses in the debt collection industry. Additionally, in recent months the CFPB has publicly targeted the practice of collecting several types of debt, including student loan and medical debt, as well as the practice of credit reporting. Just last month, the CFPB provided notice to stakeholders that it plans to begin the pre-rule-making process for a rule under the Fair Credit Reporting Act, which could have a major impact on industry operations

In its brief, ACA framed the present case before the court as a corollary to the Supreme Court’s decision in Seila Law, where the court held that Congress’ limitations on the executive’s removal powers of the CFPB’s director violated separation of powers principles. Here, like in Seila Law, Congress is limiting the oversight and accountability authority of a branch of government—the only difference now being that Congress was limiting its own powers by deferring appropriations authority to the CFPB and the Federal Reserve. ACA sees the funding mechanism as non-severable from the rest of the CFPB’s authorizing statute and urges a stay of the ruling “to allow Congress the opportunity to minimize the [market] disruption.”

Chamber of Commerce et al.

The U.S. Chamber of Commerce, the National Federation of Independent Business Small Business Legal Center, the American Bankers Association, the American Financial Services Association, the Consumer Bankers Association, the Independent Community Bankers of America, the Independent Bankers Association of Texas, the Texas Association of Business, the Texas Bankers Association, and the Longview Chamber of Commerce filed a brief calling the bureau’s funding “historically unique—and unconstitutional.” The Chamber et al. argued the CFPB “lack[ed] accountability to Congress or to the people themselves” by virtue of the unusual funding procedure. The Chamber et al. acknowledges that Congress intended to “exempt it from the typical political pressures,” but argues that these political pressures can be better described as democratic accountability. Underlying the brief’s argument is just how expansive the CFPB’s authority is—meaning that Congress’ delegation of funding powers combined with expansive regulatory authority leads to an agency without guardrails or oversight. Unlike others, though, the Chamber et al. argues that the funding provisions can be severed and the ruling stayed, meaning that the court can strike down the funding structure, leave the agency intact and allow Congress time to craft a temporary or permanent solution. Like the other briefs from the financial services industry, this is an attempt to restore the constitutional principles violated by the CFPB but to do so in a responsible way that does not immediately upend financial markets.

Mick Mulvaney

Former Acting Director of the CFPB Mick Mulvaney filed a brief in support of the Fifth Circuit’s decision. Mulvaney’s unique perspective as former acting director of the CFPB adds sharpness to his statement that “[the CFPB] is one of the most opaque, least transparent, and potentially most abusive agencies in the federal government.” Mulvaney sees the regular appropriations process as providing accountability to executive agencies—meaning that the CFPB’s insulation from that process excuses it from oversight. This was not, Mulvaney argues, the intention of the framers who designed the separation of powers; a design that is intended to use the structural limitations of each branch of government as an additional mechanism by which to protect individual rights. Mulvaney walks the Supreme Court through examples of CFPB oversteps and argues the congressional oversight tied to the regular, constitutional appropriations process can serve as a bullwork against future violations of individual rights.


Brownstein’s team will continue to monitor updates in this case. Now that oral arguments have been set for early in the term, it increases the possibility that there could be a decision in the case by the end of 2023. Many amici argued that Congress should be tasked with reconstituting the structure of the CFPB in a certain time frame in a constitutional way, with an appropriate funding mechanism. In that vein, an accelerated timeline for a decision would be beneficial because it would give Congress additional time to address such a directive before the country and politics turn to a heated presidential election looming in the fall of 2024.

All that being said, since this is one of the more consequential cases under consideration next term, the Supreme Court may also take its time and not issue a decision until the end of the term in spring/summer 2024. In the meantime, House Financial Services Committee Republicans have already moved a package out of their committee, which is viewed as the likely opening salvo for any negotiations with Senate Democrats who control the Banking Committee. It is expected that H.R. 2798, the CFPB Transparency and Accountability Reform Act, will get a floor vote sometime before the end of the year and will likely pass out of the House. However, Senate Democrats who have pushed back on changes to the CFPB will likely need to see significant changes to the ideas presented in this bill before moving any similar legislation in this area, which would also need to be signed by President Joe Biden. As all of this continues to unfold, Brownstein remains seated at the table for these discussions.


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