Consumer Financial Protection Bureau fighting for survival in court battle

A coalition of 22 attorneys general filed an amicus brief in the U.S. Supreme Court in support of the Consumer Financial Protection Bureau’s (CFPB) petition for review of a Fifth Circuit decision finding that the agency’s funding mechanism is unconstitutional.

In the wake of the 2008 financial crisis, Congress established the CFPB as the nation’s consumer watchdog and, critically, as an independent agency with the authority to issue rules and enforce federal consumer protection laws.

In their brief, the attorneys general argue that the CFPB has served as an invaluable partner to state law enforcement officials and that the Fifth Circuit’s reasoning threatens to invalidate past CFPB actions to the detriment of both the consumers protected by these actions and the financial service providers who have relied on these actions to guide their conduct.   

“The CFPB plays a critical role in advancing consumer protections and regulating the financial services industry,” said California Attorney General Rob Bonta. “If allowed to stand, the Fifth Circuit’s decision threatens to upend over a decade of important enforcement and regulatory work by the CFPB. With consumers already struggling to make ends meet in the face of rising inflation, the Supreme Court must step in to end the confusion and regulatory chaos caused by the Fifth Circuit’s decision.”

Following the 2008 financial crisis, Congress established the CFPB through the Dodd-Frank Wall Street Reform and Consumer Protection Act and tasked it with enforcing numerous federal consumer protection statutes and enacting regulations to further these efforts.

In establishing the CFPB, Congress specified that the agency would receive a capped amount of funding each year from the earnings of the Federal Reserve System to use to fulfill its consumer protection duties.

For over a decade, the CFPB has carried out its congressional mandate with the funding mechanism provided by statute, serving as an invaluable partner to state attorneys general, who have historically been at the forefront of efforts to protect consumers against fraudulent and abusive practices, and advancing a fair and level playing field in the consumer financial markets by promulgating regulations under federal law.  

In CFSA v. CFPB, a case challenging the CFPB’s regulation of the payday lending market, the Fifth Circuit ruled that the CFPB’s funding structure was improperly insulated from congressional review and vacated the payday lending rule due to it being promulgated while CFPB relied on that funding. This decision ran counter to previous decisions of the D.C. Court of Appeals and at least six other district courts and has thrown into question more than a decade of CFPB’s enforcement and regulatory work.

In the brief, the attorneys general urge the Supreme Court to grant the CFPB’s petition for a writ of certiorari and review the decision by the Fifth Circuit finding that CFPB’s funding scheme violates the Apportionment Clause. The attorneys general argue that CFPB’s funding is lawful, and that, more importantly, even if the Supreme Court were to find a defect in the funding scheme, vacating otherwise lawfully-promulgated regulations is an improper remedy. 

Attorney General Bonta joins the attorneys general of New York, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, Rhode Island, Washington, and Wisconsin in filing the brief. 

A copy of the brief in available here.

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