Amicus Brief: Consumer Financial Protection Bureau v. Community Financial Services Association of America
A few years ago, the Consumer Financial Protection Bureau promulgated a rule restricting how payday and other non-bank lenders can pursue loan repayments. Specifically, the CFPB barred lenders from continuing to make preauthorized withdrawal requests on a consumer’s bank account after two consecutive attempts had failed due to insufficient funds, unless the lender obtains renewed consumer authorization. The Community Financial Services Association of America sought to vacate the rule on statutory and constitutional grounds. The district court in Texas rejected these challenges, but the Fifth Circuit reversed on a violation of the Appropriations Clause. The court held that the CFPB’s funding mechanism—which exempts the agency from the ordinary appropriations process and instead allows it to control its own funding levels by making pro forma requests for monetary transfers from the Federal Reserve—unconstitutionally abdicates Congress’s appropriations power. It explained that, by giving the CFPB a “self-actualizing, perpetual funding mechanism,” Congress abandoned an important check on executive power and unified “the purse and the sword” in violation of the “separation of powers.”
The Supreme Court took the case and the CFPB filed a brief arguing that its funding structure comports with the Appropriations Clause, but regardless that the appropriate remedy for any constitutional defect isn’t vacating the rule at issue but severing any problematic provisions or prospective relief barring the CFPB from enforcing the rule against respondents by means of unconstitutionally secured funds. MI has now joined the National Civil Liberties Alliance and Buckeye Institute that expands on the challengers’ arguments (which mirror the Fifth Circuit opinion) and also illustrates the practical injuries from the constitutional violation through the experience of an NCLA client, a law firm that had to close after repeated civil investigative demands that the CFPB had no authority to initiate.
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