On July 10, the West Virginia attorney general, along with 26 other states, filed an amicus brief in support of respondents in Consumer Financial Protection Bureau v. Community Financial Services Association of America, arguing that the CFPB’s funding structure violates the Constitution and that by operating outside the ordinary appropriations process states are often left “out in the cold.” In their brief, the states urged the U.S. Supreme Court to uphold the U.S. Court of Appeals for the Fifth Circuit’s decision in which it found that the Bureau’s “perpetual self-directed, double-insulated funding structure” violated the Constitution’s Appropriations Clause (covered by InfoBytes here and a firm article here). The 5th Circuit’s decision also vacated the agency’s Payday Lending Rule on the premise that it was promulgated at a time when the Bureau was receiving unconstitutional funding.
Arguing that the Bureau is operating beyond the boundaries established by the Constitution, the states maintained that the current funding mechanism limits Congress’s ability to oversee the agency. “Even if the CFPB has done some good—and some would even dispute that premise—it wouldn't matter,” the states said, warning that “sidelining Congress can greenlight an agency to wreak havoc,” especially if the “agency wields broad regulatory and enforcement powers over the entire U.S. financial system, acts under the control of a single powerful figure, and lacks other protections from meaningful oversight.”
The appropriations process plays a crucial role in enabling states to influence agency actions indirectly, the states maintained, explaining that when an agency initiates a new enforcement initiative or significant rulemaking endeavor, it is required to publicly outline its projected work in order to secure the necessary funding to carry it out. “Disclosure on the front end of the appropriations process can empower affected parties—including the [s]tates—to take quick, responsive actions beyond lobbying their representatives (up to suing to stop illegal action, if need be).” In contrast, the Bureau’s insulation from this process has allowed it to hide its actions from public view, the states wrote. As an example, the Bureau has repeatedly declined to interpret or provide further clarity on how the provisions governing unfair, deceptive, or abusive acts or practices work.
The brief also highlighted examples of when Congress used funding cuts through the appropriations process to curtail agencies’ powers. Additionally, unlike the challenges of amending authorizing statutes, appropriations bills must be passed by Congress each year to avoid a government shutdown, which can be “a painful pill to swallow for the sake of standing up for an agency’s policy choice,” the states noted, adding that “[b]ecause appropriations involves both oversight committees and appropriations committees, agencies may have ‘less flexibility to ally themselves with executive branch officials or interest groups.’”
The states also urged the Court to “ignore doomsaying” about the consequences of finding the funding structure unconstitutional. Should the Court agree to invalidate the funding structure, Congress can pass a proper appropriations bill for the Bureau, the states explained, adding that “a rebuke from this Court would no doubt grease the sticky wheels of the legislative process and move them a bit faster.” Moreover, states could also fill any gaps should Congress somehow pare back the CFPB’s funding, the brief stressed.
Several amicus briefs were also filed this week in support of CFSA, including an amici curiae brief filed by the U.S. Chamber of Commerce and several banking associations and an amici curiae brief filed by 132 members of Congress, including 99 representatives and 33 senators, which urged the Court to uphold the 5th Circuit’s decision.