The CFPB has filed its brief in opposition to the cross-petition for certiorari filed by Community Financial Services Association (CFSA).  The CFPB’s certiorari petition seeks 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 a remedy for the constitutional violation, vacated the CFPB’s payday lending rule (Rule). 

In addition to opposing the CFPB’s petition, CFSA filed a cross-petition for certiorari in which it asks the Supreme Court to review the Fifth Circuit’s rejection of the other grounds on which CFSA claimed the Rule was unlawful.  CFSA has waived the 14-day waiting period under Rule 15.5 for distributing the cross-petition and the CFPB’s brief in opposition to the Court and has requested that the case be distributed on February 1 for the Court’s February 17 conference.  It  has also advised the Court that it intends to file a reply brief to the CFPB’s opposition to the cross-petition on or around February 1 and the CFPB has indicated that it intends to reply to CFSA’s opposition to its petition.  The Supreme Court is expected to consider whether to grant the CFPB’s certiorari petition and CFSA’s cross-petition at its February 17 conference.

In its cross-petition for certiorari, CFSA urges the Court, if it grants the CFPB’s petition, (1) to also grant its cross-petition to consider the alternative grounds for vacating the Rule that the Fifth Circuit rejected or, (2) instead of granting the cross-petition, to consider the alternative grounds as antecedent questions added to the CFPB’s petition.  CFSA frames the alternative grounds as the following questions:

  • Whether the Rule should be vacated because it was promulgated by Director Cordray while shielded from removal by President Trump under a statutory provision this Court later held is unconstitutional.
  • Whether the Rule should be vacated because the prohibited conduct falls outside the statutory definition of unfair or abusive conduct.

In its opposition to CFSA’s cross-petition, the CFPB argues that the Fifth Circuit correctly rejected CFSA’s arguments that the Rule should be vacated based on the unconstitutional removal provision and because the prohibited conduct did not fall within the CFPB’s UDAAP authority.  It also argues that the Fifth Circuit’s holdings neither conflict with any decision of another court of appeals nor otherwise satisfy the Supreme Court’s traditional criteria for discretionary review.

In its cross-petition, CFSA also argued that because the Fifth Circuit’s vacatur of the Rule can be affirmed on these alternative grounds rejected by the Fifth Circuit, constitutional avoidance principles require the Supreme Court to consider those grounds first and only reach the Appropriations Clause question if does not agree with CFSA on either of the alternative grounds.  The CFPB, in its opposition to the cross-petition, argues that the Supreme Court has no practice of exercising its certiorari jurisdiction to avoid constitutional questions in the manner that CFSA proposes.  It further argues that, in any event, neither of the questions in the cross-petition would actually provide a basis for avoiding the Appropriations Clause question.

With respect to the removal provision question, CFSA has argued that it is entitled to vacatur of the Rule if it can show that President Trump would have fired Director Cordray absent the unconstitutional impediment without regard to whether the President approved or disapproved of the Rule.  The CFPB argues that even if the Supreme Court agreed, CFSA would still need to prove that President Trump would have fired Director Cordray but for the removal restriction and on the present record, they have not done so.  As a result, “that would lead at most to a vacatur and remand for consideration of new evidence.”  Thus, according to the CFPB, since CFSA’s argument would not provide an alternative basis for affirming the Fifth Circuit’s invalidation of the Rule, it would not allow the Supreme Court to avoid the Appropriations Clause issue.  (The CFPB also notes that the White House publicly took the position that the removal provision was unconstitutional, and thus unenforceable, even before the Rule was finalized.  It states that this “strongly suggests that President Trump refrained from removing Director Cordray for reasons other than a belief that such removal would be unlawful.”)

With respect to the UDAAP question, the CFPB argues that even if the Supreme Court agrees with CFSA that the Fifth Circuit incorrectly held that the Rule’s prohibition of more than two attempted preauthorized withdrawals falls within the CFPB’s authority to prohibit unfair practices, the proper remedy would be to remand to the Fifth Circuit to consider whether the prohibition falls within the CFPB’s authority to prohibit abusive practices.  According to the CFPB, this would again not allow the Supreme Court to avoid the Appropriations Clause issue.

The CFPB concludes its brief by arguing that instead of allowing the Supreme Court to avoid the Appropriations Clause issue, taking up the questions in CFSA’s cross-petition “would needlessly complicate the litigation by compelling the parties and Court to address the unusual history of the Payday Lending Rule’s adoption, ratification, and partial rescission, as well as the extensive rulemaking record.”  It also suggests to the Supreme Court that to the extent it wishes to review one or both of the questions presented in the cross-petition, it should grant the CFPB’s petition and add the other question(s) presented.  According to the CFPB, this would allow a three-brief schedule, as opposed to the four-brief schedule that sometimes applies when a cross-petition is granted.  The CFPB asserts that a three-brief schedule would better facilitate the Supreme Court’s review of the case this Term on an expedited briefing schedule and that it is “critical” for the Supreme Court to review the case this Term because waiting until next Term would cause “severe disruption and uncertainty [to] hang over the CFPB, consumers, and the financial industry until sometime in 2024.”

An amicus brief in support of CFSA’s cross-petition was filed by the Third Party Payment Processors Association (TPPPA).  In its brief, the TPPPA asserts that the Rule “runs roughshod over the basic functions of our Nation’s critical electronic payment processing systems, requiring payment processors to adopt an entirely different system for collecting certain types of debts—primarily payday loans and other short-term, small-dollar consumer loans that are offered by non-bank lenders—by limiting the number of withdrawal attempts on a consumer’s account to repay those debts.”  TPPPA urges the Supreme Court, if it grants the CFPB’s petition, to not only review the two questions presented in CFSA’ cross-petition but to also review the question of whether the Rule is arbitrary and capricious in violation of the Administrative Procedure Act.  It argues that the Rule is arbitrary and capricious because it includes debit and prepaid card payments in its two-attempt withdrawal limit despite the fact that the CFPB’s justification for the Rule as allowing consumers to avoid insufficient funds fees does not apply to such payment methods.