Amicus Curiae Brief — Consumer Financial Protection Bureau, et al., Petitioners v. Community Financial Services Association of America, Limited, et al.
Supreme Court briefMay 15, 2023
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No. 22-448
IN THE
Supreme Court of the United States
CONSUMER FINANCIAL PROTECTION BUREAU, et al.,
Petitioners,
v.
COMMUNITY FINANCIAL SERVICES ASSOCIATION
OF AMERICA, LIMITED, et al.,
Respondents.
ON WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
BRIEF FOR STATES OF NEW YORK, ARIZONA, CALIFORNIA,
COLORADO, CONNECTICUT, DELAWARE, HAWAIʻI, ILLINOIS,
MAINE, MARYLAND, MASSACHUSETTS, MICHIGAN,
MINNESOTA, NEVADA, NEW JERSEY, NEW MEXICO,
NORTH CAROLINA, OREGON, PENNSYLVANIA,
RHODE ISLAND, VERMONT, WASHINGTON, AND WISCONSIN,
AND THE DISTRICT OF COLUMBIA AS AMICI CURIAE
IN SUPPORT OF PETITIONERS
LETITIA JAMES
Attorney General
State of New York
BARBARA D. UNDERWOOD*
Solicitor General
ESTER MURDUKHAYEVA
Deputy Solicitor General
DENNIS FAN
Senior Assistant Solicitor General
28 Liberty Street
New York, New York 10005
(212) 416-8020
barbara.underwood@ag.ny.gov
*Counsel of Record
(Counsel listing continues on signature pages.)
i
QUESTION PRESENTED
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.
ii
TABLE OF CONTENTS
Page
Table of Authorities ....................................................... ii
Interests of Amici Curiae ............................................... 1
Statement ........................................................................ 3
A. Congress Created the CFPB to Serve as a
Bulwark Against Future Financial Crises. ......... 3
B. Congress Designed the CFPB to Reinforce and
Complement the States’ Consumer-Protection
Efforts. .................................................................... 6
Summary of Argument ................................................... 8
Argument ....................................................................... 10
I.
States Have a Strong Interest in Maintaining
the CFPB’s Independent Regulatory
Authority. ............................................................. 10
A. States Substantially Benefit from the
CFPB’s Regulations....................................... 11
B. The States Rely on the CFPB as an
Important Enforcement Partner. ................. 17
II. Even if the Court Were to Invalidate the
CFPB’s Funding Structure, It Should Not
Vacate Completed Regulatory Actions. ............. 23
Conclusion ..................................................................... 29
iii
TABLE OF AUTHORITIES
Cases
Page(s)
Armstrong v. Exceptional Child Ctr., Inc., 575
U.S. 320 (2015) .........................................................26
Barr v. American Ass’n of Political Consultants,
Inc., 140 S. Ct. 2335 (2020) ......................................26
Cincinnati Soap Co. v. United States, 301 U.S.
308 (1937) ..................................................................28
Collins v. Yellen, 141 S. Ct. 1761 (2021) ............... 23–25
Community Fin. Servs. Ass’n of Am., Ltd. v.
Consumer Fin. Prot. Bureau, 143 S. Ct. 981
(2023) .........................................................................24
Consumer Fin. Prot. Bureau v. Law Offs. of
Crystal Moroney, P.C., 63 F.4th 174 (2d Cir.
2023) ....................................................................... 1, 8
Florida Lime & Avocado Growers, Inc. v. Paul,
373 U.S. 132 (1963) ....................................................7
Free Enter. Fund v. Public Co. Accounting
Oversight Bd., 561 U.S. 477 (2010) .........................23
Head Money Cases, 112 U.S. 580 (1884) ......................28
Hein v. Freedom From Religion Found., Inc.,
551 U.S. 587 (2007) ..................................................25
Madsen v. Women’s Health Ctr., Inc., 512 U.S.
753 (1994) ..................................................................23
Maine Cmty. Health Options v. United States,
140 S. Ct. 1308 (2020) ................................. 23, 24, 27
Office of Pers. Mgmt. v. Richmond, 496 U.S. 414
(1990) .........................................................................24
Reeside v. Walker, 52 U.S. (11 How.) 272 (1850) .........28
iv
Cases
Page(s)
Salazar v. Ramah Navajo Chapter, 567 U.S. 182
(2012) .........................................................................27
Seila Law LLC v. Consumer Fin. Prot. Bureau,
140 S. Ct. 2183 (2020) ........................... 17, 23, 25, 26
United States Dep’t of Navy v. Federal Lab.
Relations Auth., 665 F.3d 1339 (D.C. Cir.
2012) ..........................................................................24
Laws
Act of Feb. 19, 1875, ch. 89, 18 Stat. 329 .......................5
Banking Act of 1933, ch. 88, 48 Stat. 162 ......................5
Federal Credit Union Act, ch. 750, 48 Stat. 1216
(1934) ...........................................................................5
Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. No. 111-203, 124 Stat.
1376 (2010)..................................................................3
12 U.S.C.
§ 16...............................................................................5
§ 25b ............................................................................7
§ 289(a) ........................................................................6
§ 290 ............................................................................6
§§ 342–361 ..................................................................5
§ 481 ............................................................................5
§ 482 ............................................................................5
§ 1755 ..........................................................................5
§ 1815(d) ......................................................................5
§ 1820(e) ......................................................................5
§ 5481(12) ....................................................................4
§ 5491(a) ......................................................................4
§ 5496 ..........................................................................6
§ 5496a(b) ....................................................................6
§ 5497(a) ..................................................... 5, 6, 24, 26
v
Laws
Page(s)
12 U.S.C.
§ 5497(c) ....................................................................26
§ 5497(e) ......................................................................6
§ 5514 ..........................................................................4
§ 5517(f) .......................................................................7
§ 5531(a) ......................................................................4
§ 5531(b) ......................................................................4
§ 5551(a) ......................................................................7
§ 5551(c) ......................................................................7
§ 5552(a) ......................................................... 7, 14, 18
§ 5552(b) ............................................................... 8, 18
§ 5552(c) ......................................................................8
§ 5552(d) ......................................................................7
§ 5581(a) ................................................................. 4, 5
§ 5581(b) ................................................................. 4, 5
Administrative Sources
12 C.F.R.
§ 1041.3(b) .................................................................14
§ 1041.7 .....................................................................14
§ 1041.8 .....................................................................14
§ 1041.9 .....................................................................14
Federal Register (by year)
Defining Larger Participants of the Consumer
Debt Collection Market, 77 Fed. Reg. 65,775
(Oct. 31, 2012) ...........................................................12
Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act (Regulation Z), 78 Fed. Reg. 6,408 (Jan. 30, 2013) .............11
vi
Administrative Sources
Page(s)
Federal Register (by year)
Procedural Rule to Establish Supervisory
Authority Over Certain Nonbank Covered
Persons Based on Risk Determination, 78 Fed.
Reg. 40,352 (July 3, 2013)........................................13
Defining Larger Participants of the Student Loan
Servicing Market, 78 Fed. Reg. 73,383 (Dec. 6,
2013) ..........................................................................12
Integrated Mortgage Disclosures Under the Real
Estate Settlement Procedures Act (Regulation
X) and the Truth In Lending Act (Regulation
Z), 78 Fed. Reg. 79,730 (Dec. 31, 2013) ...................11
Defining Larger Participants of the Automobile
Financing Market and Defining Certain Automobile Leasing Activity as a Financial Product
or Service, 80 Fed. Reg. 37,496 (June 30, 2015) ....12
Payday, Vehicle Title, and Certain High-Cost
Installment Loans, 81 Fed. Reg. 47,864 (July
22, 2016) ............................................................. 15, 16
Payday, Vehicle Title, and Certain High-Cost
Installment Loans, 82 Fed. Reg. 54,472 (Nov.
17, 2017) ....................................................................16
Payday, Vehicle Title, and Certain High-Cost
Installment Loans, 85 Fed. Reg. 41,905 (July
13, 2020) ....................................................................25
Payday, Vehicle Title, and Certain High-Cost
Installment Loans, 85 Fed. Reg. 44,382 (July
22, 2020) ....................................................................25
Debt Collection Practices (Regulation F), 85 Fed.
Reg. 76,734 (Nov. 30, 2020) .....................................12
vii
Administrative Sources
Page(s)
Federal Register (by year)
Examinations for Risks to Active-Duty Servicemembers and Their Covered Dependents, 86
Fed. Reg. 32,723 (June 23, 2021) ............................12
Authority of States to Enforce the Consumer
Financial Protection Act of 2010, 87 Fed. Reg.
31,940 (May 26, 2022) ..............................................18
Miscellaneous Authorities*
Consumer Financial Protection Bureau
Consumer Resources (n.d.),
https://www.consumerfinance.gov/consumertools/........................................................................19
Enforcement by the Numbers (Feb. 2023),
https://www.consumerfinance.gov/enforcemen
t/enforcement-by-the-numbers/ ............................18
Online Payday Loan Payments (Apr. 2016),
https://files.consumerfinance.gov/f/201604_cfp
b_online-payday-loan-payments.pdf ....................15
Press Release, CFPB Bolsters Enforcement
Efforts by States (May 19, 2022),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-bolsters-enforcementefforts-by-states/ ....................................................18
Press Release, The CFPB Establishes
Framework to Better Coordinate with State
Regulators (May 21, 2013),
https://www.consumerfinance.gov/aboutus/newsroom/the-cfpb-establishes-frameworkto-better-coordinate-with-state-regulators/.........19
*Websites last visited May 15, 2023)
viii
Miscellaneous Authorities
Page(s)
Consumer Financial Protection Bureau
Press Release, CFPB, DOJ Order Trident
Mortgage Company to Pay More Than $22
Million for Deliberate Discrimination Against
Minority Families (July 27, 2022),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-doj-order-trident-mortgagecompany-to-pay-more-than-22-million-fordeliberate-discrimination-against-minorityfamilies/ ..................................................................21
Press Release, CFPB and New York Attorney
General Sue Credit Acceptance for Hiding Auto
Loan Costs, Setting Borrowers Up to Fail (Jan.
4, 2023), https://www.consumerfinance.gov/
about-us/newsroom/cfpb-and-new-yorkattorney-general-sue-credit-acceptance-forhiding-auto-loan-costs-setting-borrowers-up-tofail/ ..........................................................................22
Press Release, CFPB Invokes Dormant
Authority to Examine Nonbank Companies
Posing Risks to Consumers (Apr. 25, 2022),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-invokes-dormantauthority-to-examine-nonbank-companiesposing-risks-to-consumers/ ...................................13
ix
Miscellaneous Authorities
Page(s)
Consumer Financial Protection Bureau
Press Release, CFPB Takes Action Against
Aequitas Capital Management for Aiding
Corinthian Colleges’ Predatory Lending
Scheme (Aug. 17, 2017),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-takes-action-againstaequitas-capital-management-aidingcorinthian-colleges-predatory-lending-scheme/ ..20
Press Release, CFPB Wins Default Judgment
Against Corinthian Colleges for Engaging in a
Predatory Lending Scheme (Oct. 28, 2015),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-wins-default-judgmentagainst-corinthian-colleges-for-engaging-in-apredatory-lending-scheme/ ...................................20
Press Release, Consumer Financial Protection
Bureau and Multiple States Enter into Settlement with Nationstar Mortgage, LLC for
Unlawful Servicing Practices (Dec. 7, 2020),
https://www.consumerfinance.gov/aboutus/newsroom/consumer-financial-protectionbureau-multiple-states-enter-settlementnationstar-mortgage-llc-unlawful-servicingpractices/.................................................................20
x
Miscellaneous Authorities
Page(s)
Consumer Financial Protection Bureau
Press Release, Consumer Financial Protection
Bureau and Multiple States Enter Into Settlement with Owner of ITT Private Loans for
Substantially Assisting ITT in Unfair
Practices (Sept. 15, 2020),
https://www.consumerfinance.gov/aboutus/newsroom/cfpb-multiple-states-entersettlement-itt-private-loans-owner-assistingitt-unfair-practices/................................................20
Recovering from Elder Financial Exploitation: A
Framework for Policy and Research (2022),
https://www.consumerfinance.gov/dataresearch/research-reports/recovering-fromelder-financial-exploitation-framework-forpolicy-and-research/ ..............................................19
Research and Reports (n.d.),
https://www.consumerfinance.gov/dataresearch/research-reports/ ....................................19
Tenant Background Checks Market Report (2022),
https://www.consumerfinance.gov/dataresearch/research-reports/tenant-backgroundchecks-market-report/ ...........................................19
Other
Bob Ferguson, Wash. Att’y Gen., Proposed Rules
Affecting Small-Dollar Loans, RIN 3170-AA40
(Oct. 7, 2016), https://www.regulations.gov/
comment/CFPB-2016-0025-142685 ........................16
xi
Miscellaneous Authorities
Page(s)
Other
Dave Uejio, Consumer Fin. Prot. Bureau,
Celebrating 10 Years of Consumer Protection
(July 21, 2021),
https://www.consumerfinance.gov/aboutus/blog/celebrating-10-years-consumerprotection/ .................................................................18
Fed. Reserve Sys., The Fed Explained: What the
Central Bank Does (11th ed. 2021),
https://www.federalreserve.gov/aboutthefed/file
s/the-fed-explained.pdf ...............................................5
H. Rep. No. 111-517 (2010) .............................................4
Jessica Silver-Greenberg, Major Banks Aid in
Payday Loans Banned by States, N.Y. Times
(Feb. 23, 2013), https://www.nytimes.com/2013/
02/24/business/major-banks-aid-in-paydayloans-banned-by-states.html ...................................17
Kamala D. Harris, Cal. Att’y Gen., Comments on
Proposed Rule for Payday, Vehicle-Title, and
Certain High-Cost Installment Loans, RIN
3170-AA40 (Oct. 7, 2016),
https://www.regulations.gov/comment/CFPB2016-0025-144780 ....................................................16
Mass. Att’y Gen., Press Release, In Largest
Settlement of Its Kind, AG Healey Secures $27
Million for Thousands of Massachusetts
Consumers From Subprime Auto Lender (Sept
1, 2021), https://www.mass.gov/news/inlargest-settlement-of-its-kind-ag-healeysecures-27-million-for-thousands-ofmassachusetts-consumers-from-subprimeauto-lender ................................................................22
xii
Miscellaneous Authorities
Page(s)
Other
Roy Cooper, N.C. Att’y Gen., Payday Vehicle Title,
and Certain High-Cost Installment Loans;
Request for Information and Comments, RIN
3170-AA40 (Oct. 7, 2016),
https://www.regulations.gov/comment/CFPB2016-0025-185051 ....................................................16
S. Rep. No. 111-176 (2010) ................. 3–7, 11, 13, 15–17
INTERESTS OF AMICI CURIAE
Congress established the Consumer Financial
Protection Bureau (CFPB) as an independent federal
agency to oversee nationwide consumer financial standards and enforce those standards. For over a decade, the
CFPB has served as a valued regulatory and enforcement partner to the States, which have historically
served at the forefront of efforts to protect consumers
against fraudulent and abusive practices.
Amici curiae States of New York, Arizona,
California, Colorado, Connecticut, Delaware, Hawaiʻi,
Illinois, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Nevada, New Jersey, New Mexico, North
Carolina, Oregon, Pennsylvania, Rhode Island,
Vermont, Washington, and Wisconsin, and the District
of Columbia submit this brief in support of petitioners
CFPB and its Director. Amici urge this Court to reverse
a decision of the U.S. Court of Appeals for the Fifth
Circuit that (i) held that the CFPB’s funding structure
violates the Appropriations Clause, and (ii) vacated an
otherwise lawful regulation on the ground that it was
promulgated when the CFPB purportedly lacked a
constitutionally valid source of funding.
Amici agree with the petitioners’ argument that the
CFPB’s statutory funding structure does not violate the
Appropriations Clause. Indeed, as the Second Circuit
has held since this Court granted the petition for a writ
of certiorari, “Congress expressly appropriated the
CFPB’s funding by enacting” the underlying statute,
consistent with the Appropriations Clause. CFPB v.
Law Offs. of Crystal Moroney, P.C., 63 F.4th 174, 182–
83 (2d Cir. 2023).
Amici States submit this amicus brief principally to
explain that no matter how this Court resolves the
2
parties’ dispute over the Appropriations Clause, amici
have a compelling interest in preserving the validity of
the CFPB’s past and ongoing regulatory and enforcement actions. Amici States have a strong and longstanding role in protecting consumers from unfair practices,
including by lenders and other providers of consumer
financial products. In that role, States have sometimes
partnered with the CFPB, and sometimes relied on the
CFPB’s actions to address a problem.
The Fifth Circuit’s vacatur of a completed CFPB
action is neither justified nor compelled by law as a
remedy for a purported Appropriations Clause violation.
If that remedy is not overturned, the States and their
residents will be deprived not only of the protections
provided by the specific payday-lending regulation at
issue in this case, but also of the CFPB’s role more
broadly as a federal regulator and enforcer of consumerprotection laws in the financial domain. If accepted, the
remedy ordered below would jeopardize many of the
CFPB’s regulatory actions from across its decade-long
existence, to the detriment of the States that have relied
on those actions to protect their residents, the financial
market that has relied on the agency to guide its
conduct, and the consumers who have relied on the
agency for protection as they navigate the market.
3
STATEMENT
A. Congress Created the CFPB to Serve as a
Bulwark Against Future Financial Crises.
1. Congress created the CFPB in the Consumer
Financial Protection Act of 2010 (CFP Act), which was
enacted as Title X of the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act). See
Pub. L. No. 111-203, tit. X, 124 Stat. 1376, 1955 (2010).
The Dodd-Frank Act responded to the 2008 financial
crisis, which “nearly crippled the U.S. economy” and
caused millions of Americans to lose their jobs, homes,
and savings. S. Rep. No. 111-176, at 2, 9 (2010). As
Congress found, the crisis had resulted from “the failure
of the federal banking and other regulators to address
significant consumer protection issues detrimental to
both consumers and the safety and soundness of the
banking system.” Id. at 9.
Prior to the CFP Act, disparate federal statutes had
authorized a collection of federal banking agencies to
protect consumers from predatory lending practices and
risky financial products. But under those existing
statutory regimes, consumer protection had “fail[ed] to
get the attention or focus it need[ed],” because it was
“not the banking agencies’ priority.” Id. at 10. Those
banking agencies instead focused on “the safe and
sound operation of the banks.” Id. Nor had those prior
regimes covered nondepository financial companies
(such as mortgage originators and brokers), even though
they “were among the largest sellers of [the] subprime
and exotic mortgages” that caused the 2008 crisis. Id. at
14; see id. at 11. To make matters worse, the multiagency scheme had been saddled with “conflicting
regulatory missions, fragmentation, and regulatory
arbitrage.” Id. at 10; see id. at 15 (recounting the
4
“spectacular
regulators”).
failure
of
the
[federal]
prudential
The CFP Act established the CFPB as “an independent bureau” within the Federal Reserve System. 12
U.S.C. § 5491(a). In doing so, the Act transferred to the
CFPB eighteen existing consumer financial statutory
authorities that had belonged to other federal agencies,
id. § 5481(12), and consolidated within the CFPB the
consumer-protection functions of seven different federal
agencies, id. § 5581(a)(2), (b). In addition to those functions, the Act expanded federal supervision over
nondepository financial companies. See id. § 5514. And
the Act authorizes the CFPB to promulgate rules and
take other actions to protect consumers from “unfair,
deceptive, or abusive acts or practices.” Id. § 5531(b); see
id. § 5531(a).
By consolidating functions within a single agency,
Congress sought “to ensure that existing consumer
protection laws and regulations are comprehensive,
fair, and vigorously enforced.” H. Rep. No. 111-517, at
874 (2010) (Conf. Rep.). And the agency’s structure
further promoted “accountability” to the President and
Congress, by ensuring that federal banking agencies
could not shift blame to one another for any regulatory
failures. S. Rep. No. 111-176, at 11.
2. Congress established a stable funding structure
for the CFPB to “ensure that the Bureau has the funds
to perform its mission,” without the unpredictability that
accompanies “repeated Congressional pressure.” S. Rep.
No. 111-176, at 163. Congress recalled that the former
Office of Federal Housing Enterprise Oversight—the
predecessor to the Federal Housing Finance Agency,
which had unsuccessfully regulated Fannie Mae and
Freddie Mac leading up to the financial crisis—had
5
been “forced to go through the annual appropriations
process,” which was “widely acknowledged” to have
“helped limit [the Office’s] effectiveness.” Id.
Indeed, the funding of the federal banking agencies
whose consumer financial statutory authorities the
CFP Act transferred to the CFPB has long been
provided through independent funding structures. See
generally 12 U.S.C. § 5581(a)(2), (b) (listing agencies).
For instance, the Office of the Comptroller of the
Currency (OCC), as a component of the Department of
the Treasury, has been funded through assessments
levied on banks and savings associations for over a
century. See id. §§ 16, 481, 482; see also Act of Feb. 19,
1875, ch. 89, 18 Stat. 329. Similarly, the Federal
Deposit Insurance Corporation (FDIC) has been funded
through insurance premiums that depository institutions pay for deposit insurance. See 12 U.S.C. §§ 1815(d),
1820(e); see also Banking Act of 1933, ch. 88, sec. 8,
§ 12B(l), (y), 48 Stat. 162, 172–76, 179–80. And the
National Credit Union Administration has been funded
through fees on credit unions. See 12 U.S.C. § 1755(a)–
(b); see also Federal Credit Union Act, ch. 750, §§ 5, 6,
48 Stat. 1216, 1217–18 (1934).
Under the CFP Act, the CFPB is funded through
“the combined earnings of the Federal Reserve System”
through a designated “Bureau Fund” of the Federal
Reserve. Id. § 5497(a), (b)(1). The Federal Reserve, in
turn, derives its earnings from the interest on securities
that it has acquired on the open market and from fees
for services that it has offered to depository institutions.
See Fed. Reserve Sys., The Fed Explained: What the
Central Bank Does 4 (11th ed. 2021); see also 12 U.S.C.
§§ 342–361. The Federal Reserve interacts with the
Treasury with respect to its funding only if the Federal
Reserve has a designated amount of surplus funds in
6
excess of its operating expenses. The Federal Reserve is
required to deposit any such surplus funds into the
general fund of the Treasury, rather than retain them
for itself. See 12 U.S.C. §§ 289(a)(3)(B), 290. Should the
CFPB require additional funding that would be drawn
from the Treasury, the CFP Act requires the agency to
obtain congressional approval. Id. § 5497(e).
As Congress recognized, “the CFPB budget is
modest” “[b]y comparison with other financial regulatory
bodies,” such as the FDIC, OCC, and the Securities and
Exchange Commission. S. Rep. No. 111-176, at 163–64.
And as the CFPB explains (Pet. Br. 4), the Bureau Fund
is subject to significant statutory limitations. The CFP
Act leaves undisturbed Congress’s plenary authority to
modify the CFPB’s funding structure through subsequent legislation. And the Act provides for several means
of congressional oversight, including through annual
audits and reports. See 12 U.S.C. §§ 5496, 5496a(b),
5497(a)(5).
B. Congress Designed the CFPB to Reinforce
and Complement the States’ ConsumerProtection Efforts.
The CFP Act also reinforced the coordinate roles of
the CFPB and the States in protecting consumers.
Congress designed a “strong and independent Bureau
. . . to set a strong, consistent standard” in consumer
financial laws nationwide. S. Rep. No. 111-176, at 174.
The CFPB would “establish a basic, minimum federal
level playing field for all banks and, for the first time,
nondepository financial companies that sell consumer
financial products and services to American families.”
Id. at 11.
7
The States, meanwhile, would be positioned to
enact “more protective standards” “as problems arise.”
Id. at 174. The States have maintained a “traditional
power” to take regulatory actions that are “designed for
the protection of consumers.” Florida Lime & Avocado
Growers, Inc. v. Paul, 373 U.S. 132, 150 (1963). And the
CFP Act recognizes that States have historically been
“much closer to abuses and are able to move more quickly
when necessary to address them.” S. Rep. No. 111-176,
at 174.
To that end, the CFP Act clarified that its
provisions do not preempt state consumer financial
laws that afford greater protections to consumers than
federal law. 12 U.S.C. § 5551(a). The Act also eased the
existing restrictions against state laws governing
national banks, certain nondepository institutions, and
federal savings associations. Id. §§ 25b, 1465. And the
Act preserves the regulatory authority of the States’
various insurance regulators and securities commissions. Id. § 5517(f), (h); see id. § 5552(d)(2)–(3).
Indeed, the CFP Act contemplates that the CFPB’s
consumer financial reforms may follow from state
reforms. The Act authorizes the States to request a
federal consumer financial regulation from the CFPB.
See 12 U.S.C. § 5551(c). In doing so, Congress recognized that “State initiatives can be an important signal
to Congress and Federal regulators of the need for
Federal action.” S. Rep. No. 111-176, at 174.
The CFP Act also expanded the role of the States in
pursuing enforcement actions. The Act authorizes any
state attorney general to sue to enforce the CFPB’s
statutory or regulatory authorities. 12 U.S.C.
§ 5552(a)(1). States must notify the CFPB of such
enforcement actions where “practicable” to facilitate
8
coordination, and the CFPB is then authorized to
intervene in those actions. Id. § 5552(b)(1)(B), (2). But
the CFPB’s participation does not displace or conflict
with the States’ ability to proceed with an action.
Rather, Congress contemplated a measure of cooperation, in authorizing the CFPB to promulgate regulations and guidance “to further coordinate actions with
the State attorneys general and other regulators.” Id.
§ 5552(c).
SUMMARY OF ARGUMENT
Amici States agree with the CFPB (Pet. Br. 13–38)
that the CFP Act’s funding structure does not violate
the Appropriations Clause, as the Second Circuit has
also recently held. See Law Offs. of Crystal Moroney, 63
F.4th at 182–83. This amicus brief focuses principally
on whether the proper remedy for a purported Appropriations Clause violation is the vacatur of an otherwise
lawful regulation. Respondents’ arguments as to that
remedial issue would not only require invalidating the
payday-lending regulation at issue in this case but
would also put at risk many other regulatory actions
taken by the CFPB during the period when it was
receiving allegedly unconstitutional funding.
Vacating the CFPB’s regulations as a consequence
of an Appropriations Clause violation threatens
substantial harm to the States. The CFPB plays a
critical role in the stability of key sectors of the financial
market, including with respect to nondepository financial companies (such as mortgage brokers and originators) that had gone unsupervised prior to the 2008
financial crisis. The CFPB’s regulations, moreover, set
nationwide consumer financial standards—on topics
9
important to everyday consumers, ranging from mortgage lending requirements to debt-collection practices
—that protect the States’ residents and that the States
may sue to enforce pursuant to the CFP Act. Significantly, those regulations often target financial sectors
where the States may face challenges in regulating
fraudulent and abusive practices. That dynamic is
illustrated by the payday-lending rule at issue here,
which sets nationwide standards to regulate situations
where payday lenders have sought to move online in
their attempts to escape state regulation.
The CFPB’s important role in partnering with the
States could be equally jeopardized by a broad remedy
for any Appropriations Clause violation. The CFPB often
coordinates in bringing joint or parallel enforcement
actions with the States to enforce the CFPB’s consumer
financial standards. And the CFPB has engaged in still
other functions—from handling consumer complaints to
providing information to consumers on critical financial
issues—that have complemented the States’ consumerprotection efforts and have also guided conduct for the
financial market. Losing the CFPB’s continued contributions would seriously impair the States’ efforts to combat
fraud and abuse in the consumer financial market.
Such concrete harms to the States and their
residents stand in sharp contrast to the indeterminate
nature of any purported constitutional harm to respondents. Respondents—which are payday-lending industry
groups—do not claim that the CFPB’s specific source of
funding from the Federal Reserve has itself resulted in
a direct pecuniary harm to them. Nor can they seriously
claim any harm to Congress’s control of the CFPB, as
Congress has retained plenary authority to modify the
CFPB’s funding through legislation and is able to engage
in other forms of oversight. Indeed, it is altogether
10
speculative that the CFPB might somehow have
behaved differently had its funding been drawn from
the Treasury rather than the Federal Reserve.
The mismatch between the meager harms identified
by respondents and the deleterious effects of the
remedial order highlights the impropriety of vacating a
CFPB regulation as a remedy for a purported Apportionment Clause violation. This case is not one where a
federal agency acted in derogation of Congress’s direction or in a manner inconsistent with express funding
limitations. To the contrary, the Fifth Circuit found that
the challenged rule was within the scope of the CFPB’s
delegated authority; in other words, the executive
agency acted entirely as Congress commanded. Vacatur
is not needed to mend a conflict between Congress and
the Executive that does not otherwise exist.
ARGUMENT
I.
STATES HAVE A STRONG INTEREST IN
MAINTAINING THE CFPB’S INDEPENDENT
REGULATORY AUTHORITY.
Congress responded to the 2008 financial crisis by
establishing the CFPB as an independent federal
regulator that sets nationwide consumer financial
standards and coordinates with the States in their
enforcement actions. Since then, the CFPB’s robust,
stable regulatory authority under the CFP Act has
empowered the States to safeguard consumers from
risky financial products. The Fifth Circuit’s ruling
threatens to upend that scheme, in undermining the
validity of the CFPB’s prior agency actions taken over
the last twelve years.
11
A. States Substantially Benefit from
the CFPB’s Regulations.
1. The CFPB’s exercise of its independent regulatory
authority has “set a strong, consistent standard” in
consumer financial laws nationwide. See S. Rep. No.
111-176, at 174. As Congress intended in enacting the
CFP Act, the CFPB’s regulations have established “a
basic, minimum federal level playing field for all banks
and, for the first time, nondepository financial companies that sell consumer financial products and services
to American families.” Id. at 11. Those regulatory
actions, in turn, have bolstered the States’ enforcement
of consumer financial laws.
The CFPB’s regulatory efforts reach numerous
areas of core significance to the States, their residents,
and the consumer financial community. For instance,
the CFPB has issued regulations that require lenders to
make a reasonable and good-faith determination of a
consumer’s ability to repay a mortgage before offering
one in the first place. Those same regulations establish
safe harbors, allowing mortgage lenders to adjust their
practices to avoid potential liability. 1 The CFPB’s
regulations set forth the proper form of lenders’ mortgage disclosures, which establish stable nationwide
expectations for consumers and industry members
alike. 2 The CFPB, moreover, has set nationwide standards for collecting consumer debts, including by
prohibiting abusive debt-collection practices and by
1 Ability-to-Repay and Qualified Mortgage Standards Under
the Truth in Lending Act (Regulation Z), 78 Fed. Reg. 6,408 (Jan.
30, 2013).
2 Integrated Mortgage Disclosures Under the Real Estate
Settlement Procedures Act (Regulation X) and the Truth In
Lending Act (Regulation Z), 78 Fed. Reg. 79,730 (Dec. 31, 2013).
12
requiring appropriate disclosures to consumers in the
course of collection efforts. 3 And the CFP Act authorizes
the CFPB to conduct examinations of banks and credit
unions, including those that lend to servicemembers
and their dependents, to ensure they are honoring the
statutory protections for military families. 4
Additionally, the CFPB plays a robust role in
ensuring the soundness of key sectors of the financial
market, including some industries that had escaped the
oversight of federal banking agencies prior to the CFP
Act. In particular, the CFPB holds the authority to
examine previously unsupervised nondepository financial companies that interact with everyday consumers
with respect to the most significant financial decisions
of their lifetimes. Under that authority, the CFPB is
authorized to supervise servicers of student loans, the
financing market for automobile loans and leases, and
other debt collectors. 5 In a similar vein, the CFPB is
authorized to identify other novel nondepository financial companies (such as financial-technology or “fintech”
3 Debt Collection Practices (Regulation F), 85 Fed. Reg. 76,734
(Nov. 30, 2020).
4 See Examinations for Risks to Active-Duty Servicemembers
and Their Covered Dependents, 86 Fed. Reg. 32,723 (June 23,
2021).
5 Defining Larger Participants of the Automobile Financing
Market and Defining Certain Automobile Leasing Activity as a
Financial Product or Service, 80 Fed. Reg. 37,496 (June 30, 2015);
Defining Larger Participants of the Student Loan Servicing Market,
78 Fed. Reg. 73,383 (Dec. 6, 2013); Defining Larger Participants of
the Consumer Debt Collection Market, 77 Fed. Reg. 65,775 (Oct.
31, 2012).
13
companies) that pose unique risks to consumers, and to
examine those risks. 6
As Congress predicted, securing a stable financial
market for consumers has resulted in part from the
presence of an independent federal regulator that
complements the States by setting a federal consumerprotection baseline. In enacting the CFP Act, Congress
was especially concerned with the “regulatory arbitrage
between federal regulators and the states” in the leadup
to the 2008 financial crisis. S. Rep. No. 111-176, at 10.
Particularly with nondepository financial companies,
Congress found that “the lack of any effective supervision [of] nondepositories led to a ‘race to the bottom’ in
which the institutions with the least effective consumer
regulation and enforcement attracted more business,”
leading in turn to pressures on state regulators to lower
state regulatory standards. Id. And as Congress found,
the lowering of these standards was directly connected
to the “kinds of problems that led to the [2008] crisis.”
Id. at 16.
As envisioned by Congress, the States have also
meaningfully relied on the CFPB’s regulatory standards. The CFPB’s issuance of regulations that span the
student-loan to automobile-lending markets has necessarily diminished the need for the States to legislate.
Notably, the CFP Act authorizes state attorneys general
to identify unlawful consumer practices under the
governing federal standards and bring enforcement
actions based on violations of those federal regulations.
6 Procedural Rule to Establish Supervisory Authority Over
Certain Nonbank Covered Persons Based on Risk Determination,
78 Fed. Reg. 40,352 (July 3, 2013); see Consumer Fin. Prot. Bureau,
Press Release, CFPB Invokes Dormant Authority to Examine
Nonbank Companies Posing Risks to Consumers (Apr. 25, 2022).
14
See 12 U.S.C. § 5552(a)(1). For instance, States have
independently brought enforcement actions against
lenders for offering predatory subprime home loans in
violation of federal loan-disclosure regulations. 7 And
States have brought actions against mortgage servicers
for mishandling consumers’ loans in violation of federal
mortgage-servicing regulations. 8
2. The payday-lending rule at issue in this case
illustrates the strength of the States’ interest in preserving the CFPB’s regulatory authority. In particular, the
regulation exemplifies the States’ reliance on and benefits from the ability of an independent federal regulator
to address areas where lenders may attempt to evade
state regulation.
The regulation, in its current form, prohibits “an
unfair and abusive practice” relating to the collection of
payday and certain other loans. 12 C.F.R. §§ 1041.7,
1041.8; see id. § 1041.3(b). Specifically, the regulation
targets a lender’s attempts to withdraw payments
directly from a consumer’s bank account. The regulation
requires lenders to disclose information to consumers
before they attempt to withdraw payments in the first
place. Id. § 1041.9. And once two prior consecutive
attempts fail due to a lack of funds, the regulation prohibits further attempts unless the consumer reauthorizes
the lender to withdraw payments. Id. §§ 1041.7,
1041.8(b).
7 E.g., First Am. Compl. at 67–69, New York v. Vision Prop.
Mgmt., LLC, No. 19-cv-7191 (S.D.N.Y. Sept. 27, 2019), ECF No. 24
(New York).
8 E.g., Second Am. Compl. ¶¶ 35–46, Office of the Att’y Gen. v.
Ocwen Fin. Corp., No. 17-cv-80496 (S.D. Fla. July 11, 2018), ECF
No. 88 (Florida).
15
These federal consumer-protection standards are
consistent with the basic purpose of the CFP Act. In
enacting the CFP Act, Congress specifically highlighted
problems arising from payday lending, including by
noting that “[l]oans secured by personal checks or
electronic access to the borrower’s bank account can
endanger the banking status of borrowers” and result in
“additional fees” for consumers. S. Rep. No. 111-176, at
21. And for borrowers with overdraft protections, those
“consumers have been charged multiple fees in one day
without being notified until days later.” Id. at 18. As the
CFPB similarly found in examining the payday-lending
problem in the present rulemaking, lenders’ withdrawal
practices in this area had resulted in consumers incurring significant overdraft fees and, in some cases, losing
the deposit accounts at their banks. See Payday, Vehicle
Title, and Certain High-Cost Installment Loans, 81 Fed.
Reg. 47,864, 48,049 (July 22, 2016); see also Consumer
Fin. Prot. Bureau, Online Payday Loan Payments 3
(Apr. 2016) (noting average of $185 in overdraft fees per
borrower). And significantly, payday and other shortterm lenders had often operated as nondepository financial companies that would have escaped supervision by
federal banking agencies prior to the CFP Act. See 81
Fed. Reg. at 47,868.
In recognizing the need to complement the States’
regulatory and enforcement efforts in this financial
sector, the CFPB considered how numerous States had
restricted payday loans and similar financial products
and could bring their own enforcement actions under
state law. See 81 Fed. Reg. at 47,875–76. As part of the
rulemaking, the CFPB engaged in “a large number of
meetings and calls with State Attorneys General, State
financial regulators, and municipal governments.”
16
Payday, Vehicle Title, and Certain High-Cost Installment Loans, 82 Fed. Reg. 54,472, 54,504–05 (Nov. 17,
2017); see id. at 54,505 (recounting that CFPB met
“with many of them, some on multiple occasions”). In
addition, the CFPB “carefully considered” comments on
the proposal regarding lenders’ withdrawal practices,
id., including those submitted by multiple States.9
The CFPB found that the payday-lending rule would
complement the States’ efforts by enhancing regulatory
protections for consumers, providing additional avenues
for enforcement, and eliminating loopholes that would
allow bad actors to evade state restrictions. Just as
Congress recognized that an effective federal baseline
could prevent a “‘race to the bottom’” among state
regulatory authorities, see S. Rep. No. 111-176, at 10,
the CFPB realized a similar dynamic playing out in the
payday-lending industry. In proposing the regulation,
the CFPB noted that online lenders had begun offering
payday lending nationwide while attempting to claim
they were exempt from state enforcement outside of the
jurisdiction where they were located. 81 Fed. Reg. at
47,877. Although payday-lending laws vary from State
to State, in-state banks—“even in states where the loans
are banned entirely”—were often permitting abusive
withdrawal practices from out-of-state lenders that
operated in jurisdictions where such lending was
9 See Roy Cooper, N.C. Att’y Gen., Payday Vehicle Title, and
Certain High-Cost Installment Loans; Request for Information and
Comments, RIN 3170-AA40 (Oct. 7, 2016) (discussing payday
lenders’ attempts to evade state laws and “urg[ing] the [CFPB] to
adopt the toughest rule possible”); see also Kamala D. Harris, Cal.
Att’y Gen., Comments on Proposed Rule for Payday, Vehicle-Title,
and Certain High-Cost Installment Loans, RIN 3170-AA40 (Oct. 7,
2016); Bob Ferguson, Wash. Att’y Gen., Proposed Rules Affecting
Small-Dollar Loans, RIN 3170-AA40 (Oct. 7, 2016).
17
permitted. 10 It was thus a significant benefit to the
States that the CFPB conducted a broader analysis of
the payday-lending problem to formulate a federal baseline for lender practices, after confirming that lenders
nationwide had engaged in abusive conduct. See id. at
47,868–79.
If permitted to stand, the Fifth Circuit’s decision
could lead to the vacatur of the regulation at issue and
numerous other CFPB prior regulations that similarly
set robust, nationwide protections for consumers,
provide stable guidance in the financial market, and
complement the States’ regulatory and enforcement
efforts. In addition, invalidating the CFPB’s regulations
would both substantially impede the States’ efforts to
pursue enforcement actions based on those rules and
upend regulatory protections that the States’ residents
have relied on and benefitted from for years.
B. The States Rely on the CFPB as an
Important Enforcement Partner.
1. In addition to its rulemaking authority, the CFPB
“has the authority to conduct investigations, issue
subpoenas and civil investigative demands, initiate
administrative adjudications, and prosecute civil actions
in federal court.” Seila Law LLC v. CFPB, 140 S. Ct.
2183, 2193 (2020). As of December 2022, the CFPB had
recovered $16 billion for consumers from its supervisory
and enforcement work and obtained relief benefiting
over 192 million consumers across the country, including
10 Jessica Silver-Greenberg, Major Banks Aid in Payday Loans
Banned by States, N.Y. Times (Feb. 23, 2013) (cited at 81 Fed. Reg.
at 48,054 n.806).
18
in amici States. 11 The CFPB, moreover, has handled
over three million consumer complaints concerning
financial products and services. 12 The existence of a
parallel, independent federal regulator dedicated to
consumer protection has substantially reinforced the
States’ longstanding efforts to protect consumers from
fraudulent and abusive practices in the consumer financial sector.
The CFPB also participates with the States in
bringing enforcement actions, as the CFP Act contemplates. See 12 U.S.C. § 5552(a)(1), (b)(2). 13 In addition,
the CFPB has memoranda of understanding with the
attorneys general in twenty States and regulators in all
fifty States, the District of Columbia, and Puerto Rico. 14
And the CFPB and the Conference of State Bank Supervisors (which acts on behalf of state financial regulatory
authorities) have a framework on the supervision of
11 Consumer Fin. Prot. Bureau, Enforcement by the Numbers
(Feb. 2023).
12 Dave Uejio, Consumer Fin. Prot. Bureau, Celebrating 10
Years of Consumer Protection (July 21, 2021).
13 E.g., Compl. at 1–2, CFPB v. Burlington Fin. Grp., LLC, No.
21-cv-2595 (N.D. Ga. June 28, 2021), ECF No. 1 (Georgia); Second
Am. Compl. at 2–4, Bureau of Consumer Fin. Prot. v. Consumer
Advocacy Ctr. Inc., No. 19-cv-1998 (C.D. Cal. Apr. 20, 2021), ECF
No. 284 (California, Minnesota, North Carolina); Compl. at 1,
Bureau of Consumer Fin. Prot. v. Alder Holdings, LLC, No. 4:20-cv1445 (E.D. Ark. Dec. 11, 2020), ECF No. 1 (Arkansas); Am. Compl.
at 1–2, Bureau of Consumer Fin. Prot. v. Commonwealth Equity
Grp., LLC, No. 20-cv-10991 (D. Mass. Sept. 16, 2020), ECF No. 26
(Massachusetts). States may also bring their own actions to enforce
the CFP Act. See Authority of States to Enforce the Consumer
Financial Protection Act of 2010, 87 Fed. Reg. 31,940 (May 26,
2022).
14 Consumer Fin. Prot. Bureau, Press Release, CFPB Bolsters
Enforcement Efforts by States (May 19, 2022).
19
depository and nondepository financial companies that
fall under their respective jurisdictions. 15
Beyond participating in enforcement actions, the
CFPB routinely publishes studies on issues relevant to
vulnerable communities, such as on tenant background
checks and elder exploitation. 16 The CFPB also guides
consumers through numerous important financial decisions, from buying a home to securing an auto loan to
paying for college to planning for retirement. 17 And the
CFPB has collaborated with the States to develop and
implement broad initiatives to combat abusive practices
and tactics, to share information to monitor market
practices and trends, and to more swiftly identify
incipient fraudulent or abusive practices.
2. Joint enforcement actions between the CFPB and
the States have achieved meaningful results for
consumers across the nation. For example, in December
2020, the CFPB, all fifty States, and the District of
Columbia brought a successful enforcement action
against Nationstar Mortgage, LLC, for numerous
unfair and deceptive practices relating to Nationstar’s
servicing of borrowers’ mortgages. As the CFPB noted,
Nationstar at the time was one of the country’s largest
mortgage servicers and the single largest nonbank,
nondepository mortgage servicer. That action resulted
15 Consumer Fin. Prot. Bureau, Press Release, The CFPB
Establishes Framework to Better Coordinate with State Regulators
(May 21, 2013).
16 E.g., Consumer Fin. Prot. Bureau, Tenant Background
Checks Market Report (2022); Consumer Fin. Prot. Bureau,
Recovering from Elder Financial Exploitation: A Framework for
Policy and Research (2022). See generally Consumer Fin. Prot.
Bureau, Research and Reports (n.d.) (database of agency reports
and analyses).
17 Consumer Fin. Prot. Bureau, Consumer Resources (n.d.).
20
in about $73 million in relief to more than 40,000
borrowers. 18
Similarly, in September 2020, the CFPB collaborated with forty-seven States and the District of
Columbia in seeking relief against the loan originator
for the ITT Technical Institute—a now-defunct forprofit technical school—for its unfair practices in offering loans that would be unaffordable to borrowers. As a
result, the loan originator forgave around $330 million
in debt to around 35,000 borrowers. 19 That effort itself
built on prior federal–state efforts to curtail the unfair
lending practices of for-profit institutions such as the
Corinthian Colleges and their loan originators, as well
as the conduct of those institutions’ loan servicers, such
as Navient Corporation. 20
18 Consumer Fin. Prot. Bureau, Press Release, Consumer
Financial Protection Bureau and Multiple States Enter into Settlement with Nationstar Mortgage, LLC for Unlawful Servicing
Practices (Dec. 7, 2020); see Stipulated Final Judgment & Order,
Bureau of Consumer Fin. Prot. v. Nationstar Mortg. LLC, No. 20cv-3550 (D.D.C. Dec. 8, 2020), ECF No. 3.
19 Consumer Fin. Prot. Bureau, Press Release, Consumer
Financial Protection Bureau and Multiple States Enter Into Settlement with Owner of ITT Private Loans for Substantially Assisting
ITT in Unfair Practices (Sept. 15, 2020); see Stipulated Final J. &
Order, Bureau of Consumer Fin. Prot. v. Peaks Trust 2009-1, No.
20-cv-2386 (S.D. Ind. Oct. 1, 2020), ECF No. 9.
20 Consumer Fin. Prot. Bureau, Press Release, CFPB Takes
Action Against Aequitas Capital Management for Aiding
Corinthian Colleges’ Predatory Lending Scheme (Aug. 17, 2017);
Consumer Fin. Prot. Bureau, Press Release, CFPB Wins Default
Judgment Against Corinthian Colleges for Engaging in a Predatory
Lending Scheme (Oct. 28, 2015); see Compl., CFPB v. Navient
Corp., No. 3:17-cv-101 (M.D. Pa. Jan. 18, 2017), ECF No. 1.
21
Several States supporting respondents on the merits
have claimed that, without a congressional appropriations process, the States do not know “what the [CFPB]
is up to” (West Virginia Cert. Amicus Br. 15) and
lamented the CFPB’s “indifference” to their needs and
the lack of “any meaningful voice in agency decisions
that affect the nation’s economic security and the dayto-day lives of millions of American consumers” (id. at
17–18). These stated concerns are belied by the participation of these very States in enforcement actions with
the CFPB, such as those described above, which have
resulted in substantial relief for these States and their
residents. See supra at 20 n.13, 20–21.
The CFPB’s collaboration with States has
continued to this day. In July 2022, the CFPB joined
forces with Delaware, New Jersey, and Pennsylvania
(and the U.S. Department of Justice) in enforcement
actions against Trident Mortgage Company for redlining majority-minority neighborhoods when offering
loans and refinancing products. The actions resulted in
a global settlement that requires Trident to pay over
$18 million toward offering loan subsidies that apply
toward those neighborhoods and $2 million to fund
corrective marketing efforts, as well as a $4 million fine
to be paid to victims.21
Additionally, in an effort to combat unfair and
deceptive practices, the CFPB and New York have
recently brought an enforcement action against a
predatory auto lender that offered loans that consumers
21 Consumer Fin. Prot. Bureau, Press Release, CFPB, DOJ
Order Trident Mortgage Company to Pay More Than $22 Million
for Deliberate Discrimination Against Minority Families (July 27,
2022); see Consent Order, CFPB v. Trident Mortg. Co., No. 2:22-cv2936 (E.D. Pa. Sept. 14, 2022), ECF No. 13.
22
were unable to repay and that hid the true cost of the
loan. 22 This was an example of an action by the
independent federal regulator responding to developments in the States, as that New York action came about
after Massachusetts had reached an earlier settlement
with the same lender. 23
The Fifth Circuit’s decision threatens these ongoing
enforcement actions. In the wake of that decision, some
courts have halted enforcement actions in which the
States are involved together with the CFPB, and other
courts are considering applications for similar relief. 24
Thus, it is apparent that if the decision below is not
overturned, amici States and their residents are at risk
of losing the important support of the CFPB in
numerous actions.
22 Consumer Fin. Prot. Bureau, Press Release, CFPB and New
York Attorney General Sue Credit Acceptance for Hiding Auto
Loan Costs, Setting Borrowers Up to Fail (Jan. 4, 2023); see Compl.,
CFPB v. Credit Acceptance Corp., No. 23-cv-38 (S.D.N.Y. Jan. 4,
2023), ECF No. 1.
23 Mass. Att’y Gen., Press Release, In Largest Settlement of Its
Kind, AG Healey Secures $27 Million for Thousands of Massachusetts Consumers From Subprime Auto Lender (Sept 1, 2021).
24 See, e.g., CFPB v. MoneyGram Int’l, Inc., No. 22-cv-3256
(S.D.N.Y. Dec. 9, 2022), ECF No. 52 (staying CFPB and New York
enforcement action pending the resolution of the Appropriations
Clause issues raised in this petition).
23
II. EVEN IF THE COURT WERE TO INVALIDATE THE
CFPB’S FUNDING STRUCTURE, IT SHOULD NOT
VACATE COMPLETED REGULATORY ACTIONS.
Petitioners are correct in arguing that the CFPB’s
funding structure does not violate the Appropriations
Clause (Pet. Br. 13–38). Thus, the CFP Act is itself the
appropriations legislation that satisfies constitutional
requirements. But even if this Court were to locate an
Appropriations Clause violation, it should not vacate
regulatory actions taken during a time when the CFPB
was receiving funding in a manner the Court may find
to be unconstitutional.
This Court has repeatedly rejected the argument
that a challenged agency action “must be completely
undone,” just because the agency operated with a constitutional defect at the time of its action. Collins v. Yellen,
141 S. Ct. 1761, 1788 (2021); see, e.g., Seila Law, 140 S.
Ct. at 2208–11 (refusing to invalidate a civil investigative demand issued by a prior CFPB Director who had
an unconstitutional removal protection at the time).
That holding applies even when the Court determines
that a statutory scheme violates the separation of
powers, as the respondents have claimed here (Resp.
Br. in Opp. 1). See Collins, 141 S. Ct. at 1783. Rather, a
challenger is entitled to only as much relief as would be
“sufficient” to correct the particular constitutional
defect, based on traditional remedial principles. Free
Enter. Fund v. Public Co. Accounting Oversight Bd., 561
U.S. 477, 513 (2010); see Madsen v. Women’s Health
Ctr., Inc., 512 U.S. 753, 765 (1994) (requiring relief that
is “no broader than necessary to achieve its desired
goals”).
Here, the purported Appropriations Clause defect
arises from Congress having enacted an independent
24
funding structure, rather than from the CFPB having
“lacked the authority to carry out the functions of the
office.” See Collins, 141 S. Ct. at 1788. Indeed, the Fifth
Circuit in this case affirmatively concluded that the
payday-lending rule at issue was a reasonable exercise
of the CFPB’s statutory authority under the CFP Act to
prohibit unfair, deceptive, or abusive acts or practices.
(Pet. App. 9a–14a.) The CFPB thus had the authority to
act, and the soundness of that authority is not before
the Court. See Community Fin. Servs. Ass’n of Am., Ltd.
v. CFPB, 143 S. Ct. 981 (2023) (denying respondents’
cross-petition raising issues concerning CFPB’s
authority).
Nor is there any allegation that the CFPB in
promulgating its rule spent funds that were outside of
Congress’s explicit design, such that the CFPB’s own
actions were the source of the constitutional defect. The
Appropriations Clause stands for the “straightforward
and explicit” proposition that “‘no money can be paid out
of the Treasury unless it has been appropriated by an
act of Congress.’” Office of Pers. Mgmt. v. Richmond, 496
U.S. 414, 424 (1990) (quoting Cincinnati Soap Co. v.
United States, 301 U.S. 308, 321 (1937)). The clause
permits Congress to control “how federal employees and
officers may make or authorize payments.” Maine
Cmty. Health Options v. United States, 140 S. Ct. 1308,
1321 (2020); see also United States Dep’t of Navy v.
Federal Lab. Relations Auth., 665 F.3d 1339, 1348 (D.C.
Cir. 2012) (Kavanaugh, J.) (finding that the clause
supports “Congress’s control over federal expenditures”). But here, the CFP Act broadly authorizes the
CFPB’s use of funds that are “reasonably necessary to
carry out [its] authorities,” 12 U.S.C. § 5497(a)—which
the court of appeals determined that the CFPB was
25
carrying out in promulgating its rule (see Pet. App. 9a–
14a).
“[R]etrospective relief” against the CFPB’s prior
actions also cannot be justified here based on the
mistaken view that—even though the CFPB acted as
authorized by Congress—Congress’s funding structure
“inflict[ed] compensable harm” on respondents. See
Collins, 141 S. Ct. at 1788. That is, there is no meaningful indication that, had the CFPB’s funding conformed
to the court of appeals’ understanding of the Appropriations Clause, the “Director might have altered his
behavior in a way” that relates to the challenged rule.
See id. at 1789. The CFPB’s history of dealing with
other structural constitutional problems suggests just
the opposite. After this Court held in Seila Law that the
Director had been operating with unconstitutional
removal protections, which included the period in which
the payday-lending rule was issued, the Director ratified
and then reissued the relevant provisions of that regulation. See Payday, Vehicle Title, and Certain High-Cost
Installment Loans, 85 Fed. Reg. 41,905 (July 13, 2020);
Payday, Vehicle Title, and Certain High-Cost Installment Loans, 85 Fed. Reg. 44,382 (July 22, 2020).
Similarly, there is reason to expect that the CFPB
would issue the same regulation once again, after any
Appropriations Clause defect was corrected. And
respondents’ interest in the CFPB’s funding source is
otherwise considered “‘comparatively minute and
indeterminable,’” and “‘so remote, fluctuating and
uncertain, that no basis is afforded for an appeal to the
preventive powers of a court of equity,’” Hein v. Freedom
From Religion Found., Inc., 551 U.S. 587, 600 (2007)
(quoting Frothingham v. Mellon, 262 U.S. 447, 487
(1923)).
26
Any judge-made remedy that aligns with traditional
remedial principles would instead address the specific
constitutional defects in the CFPB’s funding, by moving
that funding closer to Congress’s control. See Armstrong
v. Exceptional Child Ctr., Inc., 575 U.S. 320, 327 (2015).
The Court has stated its “decisive preference for surgical
severance” of offending statutory provisions to resolve a
constitutional problem, “rather than wholesale destruction” of a federal agency’s operations. Barr v. American
Ass’n of Political Consultants, Inc., 140 S. Ct. 2335,
2350–51 (2020) (op. of Kavanaugh, J.). Indeed, were
respondents correct that a bare violation of the Appropriations Clause could support vacating an otherwise
lawful regulation, then it is difficult to see how any prior
or ongoing action of the CFPB could evade that same
result. As a result, amici States and their residents
would stand to lose the regulatory and enforcement
benefits of the CFPB that they have relied on for over a
decade.
This Court should therefore consider whether there
are “means of remedying the defect in the CFPB’s
structure” other than invalidating challenged agency
actions taken when that any unconstitutional funding
was in place. See Seila Law, 140 S. Ct. at 2211. The
Court could, as petitioners suggest (Pet. Br. 41), sever
the CFP Act’s provision that precludes the House and
Senate Committees on Appropriations from reviewing
the CFPB’s budget. See 12 U.S.C. § 5497(a)(2)(C). If the
Court agrees with respondents (Resp. Br. in Opp. 14–
15) that it is problematic that the CFPB’s unspent funds
remain available from year to year, the Court could
sever the provision that permits the CFPB to roll over
its funds. See 12 U.S.C. § 5497(c)(1). Each of those
remedies would ensure the necessary degree of congressional control.
27
Indeed, this Court’s precedents confirm that the
lack of valid congressional appropriations should not in
and of itself invalidate agency actions taken during the
absence of appropriations. The Court has held that,
even if the federal government takes actions and incurs
obligations that have not been properly funded through
appropriations, that funding “insufficiency does not . . .
cancel its obligations.” Maine Cmty. Health Options,
140 S. Ct. at 1321 (quotation marks omitted). This
understanding makes sense. Whenever the federal
government acts—whether through promulgating regulations, holding adjudications, forming contracts, or
issuing grants—members of the public and the regulated
community (as well as the States) rely on those actions
in shaping their affairs. And generally, “it is not
reasonable to expect” those with no specific familiarity
with the appropriations process “to know how much of
[an] appropriation remain[ed] available for [an agency]
at any given time.” Salazar v. Ramah Navajo Chapter,
567 U.S. 182, 1999 (2012) (quotation marks omitted).
This Court has confronted a number of instances
where the federal government acted in the purported
absence of valid congressional appropriations, and in
none of those cases has the Court questioned the
validity of the underlying action itself. For instance, in
Maine Community Health Options, the Court considered
a statute in which Congress created a legal obligation
for the United States to pay certain healthcare insurers
if they were unprofitable. 140 S. Ct. at 1320–21. Even
though Congress had failed to appropriate sufficient
funds to pay for that eventuality, see id. at 1324–25, the
Court concluded that the failure to appropriate funds
did not, on its own, invalidate the obligation itself, see
id. at 1321–22. Or where the federal government
entered into a lease for a property in the absence of
28
appropriations to in fact pay the lease, this Court did
not question the validity of the lease itself. See Reeside
v. Walker, 52 U.S. (11 How.) 272, 289 (1850). Rather,
the landlord could properly “have presented her claim
on the United States to Congress” based on that valid
lease, “and prayed for an appropriation to pay for it.” Id.
at 291. Or where the federal government established a
customs program, this Court stated that a constitutional
objection based on the Appropriations Clause “does not
make void” the purportedly unfunded program itself.
Head Money Cases, 112 U.S. 580, 599 (1884); see also
Cincinnati Soap Co. v. United States, 301 U.S. 308 321
(1937) (purported lack of an appropriations statute for
the use of proceeds from a sales tax does not affect the
validity of the tax). The same result should obtain here.
29
CONCLUSION
The judgment of the U.S. Court of Appeals for the
Fifth Circuit should be reversed.
Respectfully submitted,
LETITIA JAMES
Attorney General
State of New York
BARBARA D. UNDERWOOD*
Solicitor General
ESTER MURDUKHAYEVA
Deputy Solicitor General
DENNIS FAN
Senior Assistant
Solicitor General
barbara.underwood@ag.ny.gov
May 2023
* Counsel of Record
(Counsel listing continues on next page.)
30
KRIS MAYES
Attorney General
State of Arizona
2005 N. Central Ave.
Phoenix, AZ 85004
KWAME RAOUL
Attorney General
State of Illinois
100 West Randolph St.
Chicago, IL 60601
ROB BONTA
Attorney General
State of California
1300 I St.
Sacramento, CA 95814
AARON M. FREY
Attorney General
State of Maine
6 State House Station
Augusta, ME 04333
PHILIP J. WEISER
Attorney General
State of Colorado
1300 Broadway, 10th Fl.
Denver, CO 80203
ANTHONY G. BROWN
Attorney General
State of Maryland
200 Saint Paul Pl.
Baltimore, MD 21202
WILLIAM TONG
Attorney General
State of Connecticut
165 Capital Ave.
Hartford, CT 06106
ANDREA JOY CAMPBELL
Attorney General
Commonwealth of
Massachusetts
One Ashburton Pl.
Boston, MA 02108
KATHLEEN JENNINGS
Attorney General
State of Delaware
820 N. French St.
Wilmington, DE 19801
DANA NESSEL
Attorney General
State of Michigan
P.O. Box 30212
Lansing, MI 48909
ANNE E. LOPEZ
KEITH ELLISON
Attorney General
State of Minnesota
75 Rev. Dr. Martin Luther
King Jr. Blvd.
St. Paul, MN 55155
Attorney General
State of Hawai‘i
425 Queen St.
Honolulu, HI 96813
(Counsel listing continues on next page.)
31
AARON D. FORD
Attorney General
State of Nevada
100 North Carson St.
Carson City, NV 89701
PETER F. NERONHA
Attorney General
State of Rhode Island
150 S. Main St.
Providence, RI 02903
MATTHEW J. PLATKIN
Attorney General
State of New Jersey
25 Market St.
Trenton, NJ 08625
CHARITY R. CLARK
Attorney General
State of Vermont
109 State St.
Montpelier, VT 05609
RAÚL TORREZ
Attorney General
State of New Mexico
P.O. Drawer 1508
Santa Fe, NM 87504
ROBERT W. FERGUSON
Attorney General
State of Washington
P.O. Box 40100
Olympia, WA 98504
JOSHUA H. STEIN
Attorney General
State of North Carolina
114 W. Edenton St.
Raleigh, NC 27603
JOSHUA L. KAUL
Attorney General
State of Wisconsin
17 W. Main St.
Madison, WI 53703
ELLEN F. ROSENBLUM
Attorney General
State of Oregon
1162 Court St. NE
Salem, OR 97301
BRIAN L. SCHWALB
Attorney General
District of Columbia
400 6th St., NW
Washington, D.C. 20001
MICHELLE A. HENRY
Attorney General
Commonwealth of
Pennsylvania
Strawberry Sq.
Harrisburg, PA 17120
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.