SCOTUS Agrees to Decide Whether CFPB’s Funding Is Unconstitutional but Will Not Hear Case Until Next Term

The U.S. Supreme Court has granted the certiorari petition filed by the CFPB seeking review of the Fifth Circuit panel decision in Community Financial Services Association of America Ltd. v. CFPB.  In that decision, the Fifth Circuit panel held the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution and, as a remedy for the constitutional violation, vacated the CFPB’s payday lending rule (Rule).  The Court was unwilling, however, to expedite the case and hear it this Term as requested by the CFPB and instead will hear the case next Term.

The Court also denied the cross-petition for certiorari filed by Community Financial Services Association (CFSA) asking the Court to review the alternative grounds for vacating the Rule that the Fifth Circuit rejected.  The Court was also unwilling to add the alternative grounds to the CFPB’s petition as antecedent questions.  CFSA had asked the Court to consider the alternative grounds as antecedent questions as an alternative to granting its cross-petition.  A ruling by the Court in favor of CFSA on one of the alternative grounds might have allowed the Court to avoid reaching the constitutional issue.  

[article_ad]

The sole question presented by the CFPB’s petition is:

"Whether the court of appeals erred in holding that the statute providing funding to the Consumer Financial Protection Bureau (CFPB), 12 U.S.C. 5497, violates the Appropriations Clause, U.S. Const. Art. I, § 9, Cl. 7, and in vacating a regulation promulgated at a time when the CFPB was receiving such funding."

Thus, by denying CFSA’s cross-petition and also rejecting CFSA’s request to consider the alternative grounds as antecedent questions to the CFPB’s petition, the Supreme Court is poised to decide the Appropriations Clause issue.

While the Court’s decision not to hear the case this Term means the Fifth Circuit decision will continue to be a cloud over all CFPB actions and could slow the pace of enforcement activity (particularly in pending cases where defendants can be expected to assert the Appropriations Clause issue as a defense), we do not expect it to impact the CFPB’s ongoing supervisory activity in any material way or deter Director Chopra from continuing to pursue his aggressive regulatory agenda.