Trade associations present argument in Supreme Court that CFPB's unique funding scheme is unconstitutional
Client(s) Community Financial Services Association of America and the Consumer Service Alliance of Texas
On behalf of two trade associations of consumer lenders subject to the Consumer Financial Protection Bureau's 2017 Payday Lending Rule, Jones Day urged the U.S. Supreme Court to uphold a Fifth Circuit decision holding that the Consumer Financial Protection Bureau's funding mechanism is unconstitutional.
In 2018, Jones Day filed a lawsuit on behalf of the Community Financial Services Association of America and the Consumer Service Alliance of Texas. Among other claims, the lawsuit challenged the Bureau's unique funding scheme, under which the Bureau enjoys perpetual unchecked power to set its own annual budget anywhere between zero and an illusory "cap" so high as to be meaningless. In October 2022, the Fifth Circuit held that this delegation of Congress's appropriations power to the Bureau violates the Constitution's structural separation of powers and, accordingly, vacated the Bureau's 2017 Payday Lending Rule. The Fifth Circuit explained that this unprecedented funding mechanism means that Congress not only ceded direct control over the Bureau's budget by exempting it from annual or other time-limited appropriations or review, but also ceded any indirect control by "providing that the Bureau's self-determined funding be drawn from a source that is itself outside the appropriations process." Therefore, "the Bureau's funding structure violates the Appropriations Clause of the Constitution and the separation of powers principles enshrined in it."
The court concluded further that because the Bureau promulgated the Payday Lending Rule using unconstitutionally requisitioned funds, vacatur of the Rule was the appropriate remedy: "without its unconstitutional funding, the Bureau lacked any other means to promulgate the rule."
Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited, No. 22-448 (U.S.); Community Financial Services Association of America Ltd. v. Consumer Financial Protection Bureau, No. 21-50826 (5th Cir.)