The Consumer Financial Protection Bureau (CFPB) has filed a new petition with the U.S. Supreme Court this week in an effort to have the Court address a recent Fifth Circuit Court of Appeals decision, which claims the funding structure of the CFPB is unconstitutional.
In the certiorari petition, filed November 14, lawyers for the CFPB claim that the Fifth Circuit decision handed down last month was made in error due to its interpretation of the structure through which the Bureau and its activities are funded.
The plaintiffs in the original case, the Community Financial Services Association of America and Consumer Service Alliance of Texas, offered challenges to the CFPB’s structure, its powers granted by Congress and the director’s protections from removal, claiming they were all unconstitutional.
The plaintiffs also argued that a payday rule implemented by CFPB in 2017 was made arbitrarily and capriciously, and exceeded its statutory authority.
The Fifth Circuit court decision agreed with the plaintiffs’ assertions, and the three-judge panel found the funding structure unconstitutional, ordering the payday lending rule to be vacated.
The Bureau is now arguing in its CFPB’s certiorari petition — which is essentially a request for a higher court to review the ruling of a lower court — that the decision relied on an erroneous understanding of the Appropriations Clause.
“The court of appeals relied on an unprecedented and erroneous understanding of the Appropriations Clause to hold the CFPB’s statutory funding mechanism unconstitutional,” the CFPB petition states. “Congress enacted a statute explicitly authorizing the CFPB to use a specified amount of funds from a specified source for specified purposes. The Appropriations Clause requires nothing more.”
The CFPB argues that the court of appeals relied on “novel and ill-defined limits” in its interpretation of the spending authority of Congress that contradicts the text of the Constitution, Supreme Court precedent and historical practice.
“[T]he court of appeals compounded its error by adopting a sweeping remedial approach that calls into question virtually every action the CFPB has taken in the 12 years since it was created,” the petition states.
The plaintiffs’ response in the case must be received by the Supreme Court no later than December 14, or 30 days after the filing of the CFPB’s petition. The petition also notes that the CFPB timed its filing so that the Court could consider the question in its current term.
Read the CFPB petition at the U.S. Supreme Court.
