Two groups of state attorneys general have filed amicus briefs in the U.S. Supreme Court urging the Court to grant the CFPB’s certiorari petition seeking review of the Fifth Circuit panel decision in Community Financial Services Association of America Ltd. v. CFPB.  In that decision, the panel held the CFPB’s funding mechanism violates the Appropriations Clause of the U.S. Constitution and, as the remedy for the violation, vacated the CFPB’s challenged payday lending rule. 

One amicus brief was filed by a group of 22 Democratic state AGs.  While the AGs argue that the Fifth Circuit erred in holding that the CFPB’s funding violates the Appropriations Clause for the reasons stated by the CFPB in its petition, they urge the court to grant the petition even if it disagrees that the merits of the Appropriations Clause issue are worthy of certiorari.  According to the AGs, the Court should grant the petition “at least to review the question of whether the court of appeals erred in vacating a regulation promulgated during a time when the CFPB received allegedly unconstitutional funding.”  They assert that the Fifth Circuit’s “sweeping remedy…threatens substantial harm to the States” because “[t]he States and their residents could stand to lose the benefits of the CFPB’s critical enforcement, regulatory, and informational functions if the decision below stands and is interpreted to impair the CFPB’s ongoing operations.”  They contend that “the court of appeals’ reasoning could jeopardize many of the CFPB’s actions from across its decade-long existence, to the detriment of both consumers protected by those actions and financial-services providers that rely on them to guide their conduct.”

Among the arguments made by the AGs for why the Fifth Circuit’s remedy is inappropriate is that there is no indication that if the CFPB’s funding had come from the Treasury rather than the Federal Reserve, the CFPB would have altered its behavior as to the payday lending rule.  They assert that former Director Kraninger’s ratification and reissuance of the rule “is strong evidence that the CFPB would have issued the same regulation once again, after any constitutional defect was corrected.”   

The other amicus brief was filed by a group of 16 Republican state AGs.  While they also urge the Supreme Court to grant the CFPB’s petition, they ask the Court to affirm the Fifth Circuit decision.  They assert that a prompt answer to the Appropriations Clause issue is needed because “as co-regulators, States are left to wrestle over how to engage with an agency whose constitutionality is a matter of open dispute.”  They also contend that if the Supreme Court does not provide an answer soon, “States will have to litigate the same issue in other districts and circuits over and over.”  The AGs claim that the appropriations process “makes the federal government more accountable to the states.”  They assert that the Fifth Circuit’s decision on the Appropriations Clause issue is correct and that the Fifth Circuit “was right to vacate a rule enacted without constitutional funding.”

Last month, the Supreme Court  granted the unopposed request of the Community Financial Services Association for a 30-day extension until January 13, 2023 to file its brief in opposition to the CFPB’s certiorari petition.  In its extension request, CFSA indicated that it is also planning to file a cross-petition for certiorari to ask the Supreme Court to review the Fifth Circuit’s rejection of its other challenges to the CFPB’s payday loan rule.  It stated that it will file its cross-petition on January 13, the same day it files its opposition to the CFPB cert petition.  The CFPB has indicated that it will respond to CFSA’s cross-petition on January 25.  To facilitate the Court’s ability to consider both petitions at the February 17 conference, CFSA agreed to waive the 14-day waiting period under Rule 15.5 for distributing the cross-petition and the CFPB’s brief in opposition to the Court, which will allow distribution to the Justices on February 1.  The CFPB is seeking to have the Supreme Court hear and decide the case this term.