CFPB Seeks Certification in Funding Dispute – Financial Services

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As we previously predicted, the Consumer Financial Protection Bureau (CFPB) has asked the Supreme Court to overturn the recent Fifth Circuit decision finding that the agency’s funding is unconstitutional. In a petition for certiorari filed less than a month after the Fifth Circuit’s ruling, the CFPB is asking the Supreme Court to hear and decide the case within that time. The CFPB petition argues that the Fifth Circuit’s finding that the agency’s funding violates the appropriations clause was flawed for a number of reasons. In the words of the CFPB:

The Court of Appeal relied on an unprecedented and erroneous interpretation of the appropriations clause to declare the CFPB’s statutory funding mechanism unconstitutional. Congress has enacted legislation explicitly authorizing the CFPB to use a specified amount of funds from a specified source for specific purposes. The credits clause does not require anything more. The Court of Appeals’ novel and ill-defined limits on Congress’s spending power contradict the text of the Constitution, the historical practice and the precedent of this Court. And the appeals court compounded its error by adopting a sweeping restorative approach that challenges virtually every action taken by the CFPB in the 12 years since its inception.

As the last sentence suggests, in addition to arguing that the Fifth Circuit’s credits clause analysis was flawed, the CFPB argues that the Fifth Circuit’s recourse analysis – which struck down the payday loan rule of the CFPB and suggested that all agency actions were equally subject to defiance – was also wrong.

Given the implications of the Fifth Circuit’s decision, we expect the Supreme Court to grant the certificate and decide the case this term, which is by June 2023.

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This article by Mayer Brown provides information and commentary on interesting legal issues and developments. The foregoing is not a complete treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action regarding the matters discussed here.

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