WASHINGTON–Two coalitions of state attorneys general are requesting the Supreme Court review the constitutionality of the CFPB's funding structure, but for “vastly different reasons.”
The two amicus briefs were filed Dec. 14 in support of the CFPB's request for review of a recent Fifth Circuit ruling holding the agency's funding structure unconstitutional and voiding its rule governing payday, vehicle-title, and certain installment loans (the Payday Rule), according to JDSupra.com.
“The filing of the briefs puts added pressure on the Supreme Court to agree to hear the case,” the analysis states.
Both groups are predicting "chaos" in consumer financial markets if the high court declines to review the case, a move that would effectively strip the CFPB of authority in the three states comprising the Fifth Circuit (Texas, Louisiana, and Mississippi) but nowhere else, JDSupra.com reported.
The Core Issue
As CUToday.info reported earlier, at issue is the Fifth Circuit's Oct. 19 decision invaliding the Payday Rule on the theory that the agency's funding structure is unconstitutional.
As CUToday.info has further reported and as JDSupra.com explained, “The CFPB, which is organized under the Federal Reserve System, is not subject to Congress's annual appropriations process. Instead, under the Consumer Financial Protection Act, the director of the agency requests operating funds from the Federal Reserve each year up to a statutory cap. The Federal Reserve System, in turn, is funded mainly through assessments on financial firms and certain interest income on investments; it too is not subject to regular Congressional appropriations.
The Fifth Circuit castigated Congress for "abandoning" its responsibility under the Appropriations Clause by creating a funding framework that is "double-insulated" from Congress, JDSupra noted.
“Then, the Fifth Circuit concluded that the constitutional defect demanded vacatur of the Payday Rule. The court held that there was a ‘linear nexus’ between the funding mechanism and the promulgation of the Payday Rule—'without its unconstitutional funding, the Bureau lacked any other means to promulgate the rule’,” the analysis continued.
Camp Number One
The amicus briefs are unanimous in their desire to see the Supreme Court review the case, but not much else,” JDSupra.com continued in its review of the issue.
“In one camp, led by New York, 21 states and the District of Columbia argue that the Fifth Circuit's decision to vacate the Payday Rule was an unnecessary and excessive remedy. They view the CFPB as a ‘valued enforcement and regulatory partner to the States’ and worry that allowing the decision below to stand "would deprive the States and their residents not only of the protections given by [the Payday Rule], but also of the CFPB's role more broadly as a federal regulator and enforcer of consumer financial laws.
“They argue that even if there is a constitutional defect in the funding approach, any remedy must address the funding issue narrowly and without undoing prior CFPB rules or other actions,” JDSupra.com stated.
Camp Number Two
In the other camp, West Virginia and 15 other states urge the Supreme Court to take the case so that it can affirm the Fifth Circuit's decision and provide clarity to states and the marketplace, according to JDSupra.com
“This group argues that the "CFPB's unprecedented funding scheme impermissibly shifts Congress's power of the purse to the Bureau,” the analysis continued. “Leaning on a variety of law review articles, they argue that because members of Congress represent state and local interests, the Congressional appropriations process is a critical means for states to influence federal agency behavior.
The West Virginia-led brief labels the case a
‘high-stakes matter.’
CFPB Agrees
In its own petition, the CFPB argued in in its petition that the Fifth Circuit ruling "threatens to inflict immense legal and practical harms on the CFPB." Indeed, since the circuit decision, at least one CFPB enforcement action within the circuit has been stayed, JDSupra.com added.
A judge presiding over a separate CFPB enforcement action, pending in a federal district court in New York, last week entered a stay of that case over the CFPB's objection, citing the CFPB's petition. Other challenges to CFPB actions can be expected, the report states.
Just in Time for the Holidays, CUToday’s Free Morning Headline Email is Now Double-Free!
Don’t forget to check your Spam/Junk email folder if you haven’t been receiving your free, popular and daily CUToday.info news headlines.
And if you haven’t yet signed up for the new email solution on which CUToday.info has partnered with ResponseGenius, you can do so here. Signing up requires less than one minute of your time.
CUToday.info has received very positive response from readers following the move to an improved provider of the daily headlines, but many also noted they did need to go to their Spam/Junk folder and mark it as safe.
The new email solution has not only improved every reader’s delivery experience, but it also features a fresh, new format that is easy to read, especially on mobile devices.
Please note and/or make your IT department or email administrator aware the emails will be coming from the domains CUTodayinfo.com and CUTodayinfoReply.com.