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
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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 OF COMMUNITY DEVELOPMENT
FINANCIAL INSTITUTIONS AND CREDIT UNIONS
INCLUDING SELF-HELP CREDIT UNION,
THE CENTER FOR RESPONSIBLE LENDING,
AND NATIONAL ASSOCIATION OF LATINO
COMMUNITY ASSET BUILDERS AS AMICI CURIAE
IN SUPPORT OF PETITIONERS
---------------------------------♦--------------------------------CLAIRE L. TORCHIANA
COHEN MILSTEIN SELLERS &
TOLL PLLC
88 Pine Street
New York, NY 10005
(212) 838-7797
RICHARD A. KOFFMAN*
EMMY L. LEVENS
ZACHARY I. KROWITZ
TRENT M. REHUSCH
COHEN MILSTEIN SELLERS &
TOLL PLLC
1100 New York Ave. NW
Washington, DC 20005
(202) 408-4600
rkoffman@cohenmilstein.com
Counsel for Amici Curiae
May 15, 2023
*Counsel of Record
================================================================================================================
COCKLE LEGAL BRIEFS (800) 225-6964
WWW.COCKLELEGALBRIEFS.COM
i
TABLE OF CONTENTS
Page
INTEREST OF AMICI CURIAE .........................
1
INTRODUCTION
AND
SUMMARY
OF
ARGUMENT.....................................................
3
ARGUMENT ........................................................
5
I.
THE BUREAU PLAYS AN INTEGRAL
ROLE
IN
REGULATING
THE
FINANCIAL SECTOR—PROTECTING
AGAINST THE RISK OF ANOTHER
SYSTEMIC FAILURE ...............................
5
A. Congress Created the Bureau to
Replace the Patchwork Regulatory
Regime that Allowed the 2008
Financial Crisis to Occur.....................
6
B. The Bureau’s Funding Mechanism—
Modeled After Other Financial
Regulators—Creates Stability and
Predictability ....................................... 13
II.
THE BUREAU HAS DEVELOPED AN
EXTENSIVE BODY OF RULES, POLICIES,
AND PRACTICES ON WHICH CONSUMERS AND SMALL FINANCIAL
INSTITUTIONS LIKE AMICI RELY ........ 16
A. The Bureau Has Used Its Authority
to Issue Rules, Orders, and Guidance
to Facilitate Compliance with the
Federal Consumer Financial Laws by
Smaller Financial Institutions and to
Protect Consumers .............................. 17
ii
TABLE OF CONTENTS—Continued
Page
B. The Bureau’s Funding Mechanism
Has Enabled the Bureau to Hold All
Entities Within Its Jurisdiction—
Including Large Financial Institutions—
Accountable ......................................... 23
III.
A RULING THAT INTERRUPTS THE
CFPB’S OPERATIONS WOULD CAUSE
MASSIVE DISRUPTION TO THE REGULATORY SYSTEM TO THE DETRIMENT
OF FINANCIAL INSTITUTIONS LIKE
AMICI AND THE CONSUMERS THEY
SERVE ....................................................... 27
CONCLUSION..................................................... 32
iii
TABLE OF AUTHORITIES
Page
CASES
Bureau of Consumer Financial Protection v.
Encore Capital Group,
No. 20-civ-01750 (S.D. Cal. Oct. 15, 2020) ..............26
Bureau of Consumer Financial Protection v.
Equifax Inc.,
No. 1:19-cv-03300-TWT
(N.D. Ga. July 22, 2019) ..........................................26
CFPB v. Credit Acceptance Corp.,
No. 1:23-civ-0038 (filed Jan. 4, 2023 S.D.N.Y.) .......26
CFPB v. MoneyGram International,
No. 1-22-civ-0325 (filed Apr. 21. 2022, S.D.N.Y.) .......26
CFPB v. Navient Corp.,
No. 3:17-CV-101, 2017 WL 3380530
(M.D. Pa. Aug. 4, 2017) ............................................26
CFPB v. Portfolio Recovery Associates,
2-23-civ-00110 (E.D. Va.).........................................26
Cmty. Fin. Servs. Assoc. of Am. v.
Consumer Fin. Prot. Bureau,
No. 21-50826 (5th Cir. 2022) ...................................14
In re Bank of America N.A.,
2014-CFPB-0004 .....................................................24
In re Bank of America N.A.,
2022-CFPB-0002 .....................................................24
In re Bank of America N.A.,
2022-CFPB-0004 .....................................................24
In re Chase Bank USA N.A.,
2015-CFPB-0013 .....................................................24
iv
TABLE OF AUTHORITIES—Continued
Page
In re Citibank N.A.,
2015-CFPB-0015 .....................................................24
In re Citibank N.A.,
2016-CFPB-0003 .....................................................24
In re Citibank N.A.,
2017-CFPB-0021 .....................................................24
In re Citibank N.A.,
2018-BCFP-0003 .....................................................24
In re CitiMortgage Inc.,
2017-CFPB-0005 .....................................................24
In re Encore Capital Group,
2015-CFPB-0022 .....................................................26
In re Equifax Inc.,
2017-CFPB-0001 .....................................................26
In re Experian Holdings Inc.,
2017-CFPB-0012 .....................................................26
In re JP Morgan Chase Bank N.A.,
2013-CFPB-0007 .....................................................24
In re JP Morgan Chase Bank N.A.,
2017-CFPB-0015 .....................................................24
In re Portfolio Recovery Associates,
2015-CFPB-0023 .....................................................26
In re TransUnion Inc.,
2017-CFPB-0002 .....................................................26
In re Wells Fargo Bank N.A.,
2016-CFPB-0015 (CFPB, Sept. 8, 2016) .................24
v
TABLE OF AUTHORITIES—Continued
Page
In re Wells Fargo Bank N.A.,
2019-BCFP-0001 (CFPB, Apr. 20, 2018) .................24
In re Wells Fargo Bank N.A.,
2022-CFPB-0011 (CFPB, Dec. 20, 2022) ................24
STATUTES
12 U.S.C. § 16 ........................................................ 14, 15
12 U.S.C. § 243 ...................................................... 14, 15
12 U.S.C. § 244 ............................................................14
12 U.S.C. § 481 ............................................................14
12 U.S.C. § 482 ............................................................14
12 U.S.C. § 1013(b)(1) .................................................29
12 U.S.C. § 1013(b)(3) .................................................31
12 U.S.C. § 1013(d) ......................................................29
12 U.S.C. § 1024 ..........................................................23
12 U.S.C. § 1025 ..........................................................23
12 U.S.C. §§ 1051-1057 ...............................................23
12 U.S.C. §§ 2801 et seq.
(Home Mortgage Disclosure Act of 1975) ............. 7, 8
12 U.S.C. § 2802
(Section 1094 of the Dodd-Frank Act) ....................20
12 U.S.C. § 2808(b)
(Home Mortgage Disclosure Act) ............................30
12 U.S.C. § 1755(a) ......................................................14
12 U.S.C. § 1755(b) ......................................................14
vi
TABLE OF AUTHORITIES—Continued
Page
12 U.S.C. § 1815(d) ......................................................14
12 U.S.C. § 1818(t)(6) ..................................................12
12 U.S.C. § 1820(e) ......................................................14
12 U.S.C. §§ 3801 et seq.
(Alternative Mortgage Transaction Parity
Act of 1982)................................................................7
12 U.S.C. §§ 4301 et seq. (Truth in Savings Act)..........8
12 U.S.C. § 4516 ..........................................................14
12 U.S.C. §§ 4901 et seq.
(Home Owners Protection Act of 1998) ....................7
12 U.S.C. §§ 5101 et seq.
(S.A.F.E. Mortgage Licensing Act of 2008) ...............7
12 U.S.C. § 5481(12) ....................................................12
12 U.S.C. § 5493(h)......................................................13
12 U.S.C. § 5497(a)(2)(A)(iii) .......................................15
12 U.S.C. § 5497(a)(2)(B) ............................................15
12 U.S.C. § 5497(e)(1) ..................................................15
12 U.S.C. § 5511(a) ........................................................6
12 U.S.C. § 5511(b)(4) .................................................28
12 U.S.C. § 5511(c)(1) ..................................................29
12 U.S.C. § 5511(c)(3) ..................................................29
12 U.S.C. § 5511(c)(4) ..................................................11
12 U.S.C. § 5511(c)(5) ..................................................11
12 U.S.C. § 5512(c)(3)(A) .............................................29
vii
TABLE OF AUTHORITIES—Continued
Page
12 U.S.C. § 5531 ..........................................................28
12 U.S.C. § 5533 ..........................................................30
12 U.S.C. § 5534 ..........................................................31
12 U.S.C. § 5581 ..........................................................12
12 U.S.C. § 5581(a)(1) .................................................12
12 U.S.C. § 5581(c)(1) ..................................................12
12 U.S.C. § 5584 ..........................................................12
15 U.S.C. § 45 (FTC Act) ..................................... 8, 9, 28
15 U.S.C. § 1601 (Home Ownership and Equity
Protection Act of 1994) ..............................................7
15 U.S.C. § 1604(a) ........................................................8
15 U.S.C. § 1639c(a) ....................................................19
15 U.S.C. § 1639c(b) ....................................................19
15 U.S.C. § 1639c(b)(2)(E) ...........................................19
15 U.S.C. § 1639c(b)(3) ................................................30
15 U.S.C. § 1639d ........................................................18
15 U.S.C. § 1650
(Higher Education Opportunity Act)........................7
15 U.S.C. §§ 1661 et seq. (Fair Credit Billing Act) ..........7
15 U.S.C. § 1681j(f)(2) (Fair Credit Reporting Act).......30
15 U.S.C. §§ 1691 et seq. ...............................................8
15 U.S.C. § 1691o-2 (Section 1071 of the DoddFrank Act) ...............................................................20
viii
TABLE OF AUTHORITIES—Continued
Page
15 U.S.C. §§ 1692 et seq. (Fair Debt Collection
Practices Act).............................................................8
15 U.S.C. §§ 1693 et seq. (Electronic Fund
Transfer Act) .............................................................7
15 U.S.C. § 1693o-1 (Section 1073 of the DoddFrank Act) ...............................................................20
Pub. L. No. 90-321, 82 Stat. 146 (1970) (Truth in
Lending Act) ..............................................................8
Pub. L. No. 91-206, 84 Stat. 49, Sec. 6 (1970) (Act
of Mar. 10, 1970) ........................................................9
Pub. L. No. 93-533, 88 Stat. 1724 (1974) (Real
Estate Settlement Procedures Act of 1974) .............8
Pub. L. No. 95-109, 91 Stat. 874 (1977) (Fair
Debt Collection Practices Act) ..................................8
Pub. L. No. 106-102, 113 Stat. 1338 (1999)
(Gramm-Leach Bliley Act) ........................................8
Pub. L. No. 111-24, 123 Stat. 1734 (2009)
(Credit Card Accountability, Responsibility
and Disclosure Act) ...................................................7
Pub. L. No. 111-203, 124 Stat. 1376 § 1061
(2010) .......................................................................12
Pub. L. No. 111-203, 124 Stat. 1376 § 1064
(2010) .......................................................................12
Pub. L. No. 111-203, 124 Stat. 1376 § 1083
(2010) (Alternative Mortgage Transaction
Parity Act) ...............................................................11
ix
TABLE OF AUTHORITIES—Continued
Page
Pub. L. No. 111-203, 124 Stat. 1376 § 1084
(2010) (Electronic Fund Transfer Act) ...................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1085
(2010) (Equal Credit Opportunity Act) ..................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1086
(2010) (Expedited Funds Availability Act) .............11
Pub. L. No. 111-203, 124 Stat. 1376 § 1087
(2010) (Fair Credit Billing Act)...............................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1088
(2010) (Fair Credit Reporting Act and Fair
and Accurate Credit Transactions Act) ..................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1089
(2010) (Fair Debt Collection Practices Act) ............11
Pub. L. No. 111-203, 124 Stat. 1376 § 1090
(2010) .......................................................................12
Pub. L. No. 111-203, 124 Stat. 1376 § 1093
(2010) (Gramm-Leach Bliley Act) ...........................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1094
(2010) (Home Mortgage Disclosure Act) ................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1095
(2010) (Homeowners Protection Act of 1998) .........11
Pub. L. No. 111-203, 124 Stat. 1376 § 1096
(2010) (Home Ownership and Equity Protection Act of 1994) ......................................................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1097
(2010) (Omnibus Appropriations Act, 2009) ..........11
x
TABLE OF AUTHORITIES—Continued
Page
Pub. L. No. 111-203, 124 Stat. 1376 § 1098
(2010) (Real Estate Settlement Procedures
Act of 1974)..............................................................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1099
(2010) (Right to Financial Privacy Act of 197) .......11
Pub. L. No. 111-203, 124 Stat. 1376 § 1100
(2010) (Secure and Fair Enforcement for
Mortgage Licensing Act of 2008) ............................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1100A
(2010) (Truth in Lending Act) ................................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1100B
(2010) (Truth in Savings Act) .................................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1100C
(2010) (Telemarketing and Consumer Fraud
and Abuse Prevention Act) .....................................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1100E
(2010) (Adjustments for Inflation in the Truth
in Lending Act) ........................................................11
Pub. L. No. 111-203, 124 Stat. 1376 § 1400(c)
(2010) .......................................................................17
Pub. L. No. 112-10, 125 Stat. 38 div B (2011)
(Defense and Full Year Appropriates Act) .............15
Pub. L. No. 114-113, 129 Stat. 2242 div. O § 704
(2015) (Consolidated Appropriations Act of
2016) ........................................................................15
Pub. L. No. 115-174, 132 Stat. 1296 (2018)
(Economic Growth, Regulatory Relief, and
Consumer Protection Act) ................................. 21, 30
xi
TABLE OF AUTHORITIES—Continued
Page
Pub. L. No. 117-81, 135 Stat. 1541 § 6102 (2021)
(National Defense Authorization Act) ....................22
Pub. L. No. 117-103, 136 Stat. 49, div. U (2022) ........21
REGULATIONS
12 C.F.R. § 1002.105(b) ...............................................20
12 C.F.R. § 1003.3(d) ...................................................20
12 C.F.R. § 1005.30(f ) .................................................20
12 C.F.R. § 1026.41(e)(4) .............................................19
12 C.F.R. § 1030(b) ......................................................19
12 C.F.R. § 1026.43(b) .................................................19
12 C.F.R. § 1026.43(f ) .................................................19
12 C.F.R. §§ 1090.104-108 ..........................................25
77 Fed. Reg. 42873 (July 20, 2012) .............................25
77 Fed. Reg. 65775 (Oct. 31, 2012) .............................25
78 Fed. Reg. 4725 (issued on Jan. 10, 2013)
(“Escrow Requirements under the Truth in
Lending Act”)...........................................................17
78 Fed. Reg. 4726 (Jan. 22, 2013) ...............................18
78 Fed. Reg. 6855 (issued on Jan. 10, 2014)...............17
78 Fed. Reg. 7215 (issued on Jan. 18, 2013)
(“Disclosure and Delivery Requirements for
Copies of Appraisals and Other Written Valuations Under the Equal Credit Opportunity
Act”) .........................................................................18
xii
TABLE OF AUTHORITIES—Continued
Page
78 Fed. Reg. 10367 (issued on Jan. 18, 2013).............18
78 Fed. Reg. 10695 (issued on Jan. 17, 2013).............18
78 Fed. Reg. 11279 (issued on Jan. 20, 2013)
(“Loan Originator Compensation Requirements
under the Truth in Lending”) .................................18
78 Fed. Reg. 35430 (June 12, 2013) ............................20
78 Fed. Reg. 44686 (July 24, 2013) .............................20
78 Fed. Reg. 60382 (Oct. 1, 2013) ...............................20
78 Fed. Reg. 73383 (Dec. 6, 2013) ...............................25
79 Fed. Reg. 56631 (Sept. 23, 2014)............................25
80 Fed. Reg. 37495 (June 30, 2015) ............................25
80 Fed. Reg. 66128 (Oct. 28, 2015) .............................21
83 Fed. Reg. 45325 (Sept. 7, 2018)..............................21
87 Fed. Reg. 37700 (June 24, 2022) ............................22
88 Fed. Reg. 16951 (March 21, 2023) .........................30
88 Fed. Reg. 30388 (May 11, 2023) (Residential
Property Assessed Clean Energy Financing
(Regulation Z)) ........................................................22
80 Fed. Reg. 59944 (Oct. 2, 2015) ...............................18
OTHER AUTHORITIES
Adam J. Levitin, The Politics of Financial
Regulation and the Regulation of Financial
Politics: A Review Essay, 127 HARV. L. REV.
1991 (2014) .................................................... 9, 10, 15
xiii
TABLE OF AUTHORITIES—Continued
Page
Br. of Mortg. Bankers Ass’n as Amici Curiae,
Seila Law v. CFPB, No. 19-7 (Dec. 16, 2019) ..........18
Chapter 311 of the 63rd Congress, 38 Stat. 717,
September 26, 1914 ...................................................8
Compliance Resources, CFPB, available at
https://www.consumerfinance.gov/compliance/
compliance-resources/ (last visited May 11,
2023) .................................................................. 19, 29
Consumer Financial Protection Circulars, CFPB,
available at https://www.consumerfinance.gov/
compliance/circulars/ (last visited May 11,
2023) ........................................................................29
Consumer Response Annual Report 2022,
available at https://files.consumerfinance.gov/
f/documents/cfpb_2022-consumer-responseannual-report_2023-03.pdf .....................................31
Facilitating the LIBOR Transition Consistent
with the LIBOR Act (Regulation Z) (CFPB
Interim
Final
Rule)
available
at
https://files.consumerfinance.gov/f/documents/
cfpb_facilitating-libor-transition-libor-actregulation-z_2023-04.pdf ......................................21
Petitions for rulemaking, CFPB, available at
https://www.consumerfinance.gov/rules-policy/
petitions-rulemaking/ (last visited May 11,
2023) ........................................................................30
xiv
TABLE OF AUTHORITIES—Continued
Page
Remarks of Richard Cordray to the American
Bankers Association, April 3, 2014, available
at https://www.consumerfinance.gov/about-us/
newsroom/prepared-remarks-of-cfpb-directorrichard-cordray-at-the-american-bar-association/ ......20
S. REP. NO. 111-176 (2010) ............................ 6, 7, 10-14
Small Entity Compliance Guides, Supervisory
Highlights ................................................................29
Supervisory Highlights Summer 2017, available
at https://files.consumerfinance.gov/f/documents/
201709_cfpb_Supervisory-Highlights_Issue-16.
pdf ............................................................................23
Supervisory Highlights Consumer Reporting
Special Edition (2019), available at https://
files.consumerfinance.gov/f/documents/cfpb_
supervisory-highlights_issue-20_122019.pdf .........25
Supervisory Highlights Student Loan Servicing
Special Edition (2022), available at https://
files.consumerfinance.gov/f/documents/cfpb_
student-loan-servicing-supervisory-highlightsspecial-edition_report_2022-09.pdf ........................25
U.S. GEN. ACCT. OFF., SEC OPERATIONS: IMPLICATIONS OF ALTERNATIVE FUNDING STRUCTURES
(2002) .......................................................................14
1
Consumer Financial Protection Bureau v.
Community Financial Services Assoc. of America,
No. 22-448
INTEREST OF AMICI CURIAE1
Amici curiae are community development credit
unions, community development financial institutions
(“CDFIs”), and related industry associations whose
memberships include institutions that are regulated
by the Consumer Financial Protection Bureau
(“CFPB” or “Bureau”). Amici, their members, and affiliates have a strong interest in ensuring that the CFPB
continues to benefit consumers by enforcing U.S. consumer protection laws and regulations ensuring regulatory oversight remains appropriately tailored to the
circumstances of the affected institutions. The CFPB’s
funding structure is constitutional and critical to ensuring that it can carry out its consumer protection
mission free from undue industry influence. For this
reason and the reasons set forth below, Amici request
that the Court find the Bureau’s funding mechanism
constitutional.
Amici serve an important role in the economy. For
example, Self-Help is one of the nation’s largest community development financial institutions. For forty
years, Self-Help has focused on creating asset building
opportunities for low-income, rural, women-headed
families and businesses, and families of color,
No counsel for either party authored this brief in whole or
in part, nor did any party or other person or entity other than
Amici curiae or their counsel make a monetary contribution to the
brief ’s preparation or submission.
1
2
primarily through financing safe, affordable home
loans and small business loans. In total, Self-Help has
provided $11 billion in financing to 159,000 homebuyers, small businesses, and nonprofit organizations and
serves more than 193,000 mostly low-income families
through more than 75 retail credit union branches in
California, Florida, Illinois, North Carolina, South
Carolina, Virginia, Washington, and Wisconsin.
Amicus curiae The Center for Responsible Lending (“CRL”), an affiliate of Self-Help, is a non-partisan,
nonprofit research and policy advocacy organization
working to promote financial fairness and economic opportunity for all, end predatory lending, and close the
racial wealth gap. CRL’s expertise gives it trusted insight to evaluate the impact of financial products and
policies on the wealth and economic stability of Asian,
Black, Latino, rural, military, low-wage, low-wealth,
and early-career workers and communities.
Amicus curiae National Association for Latino
Community Asset Builders (“NALCAB”) is a community development financial institution, grant-maker,
and hub of a national network of more than two hundred mission-driven organizations including real estate developers, business lenders, and community
development credit unions that are anchor institutions
in geographically and ethnically diverse Latino communities in 40 states, Washington, D.C., and Puerto
Rico. NALCAB strengthens and coordinates the capacity of the NALCAB Network to deploy capital and influences investors and policy makers with research,
advocacy, and technical advice. NALCAB operationalizes
3
this work in three areas: organizational capacity building for nonprofits and government agencies; policy advocacy and field building; and impact investing through
lending and asset management.
Since 2007, NALCAB has provided its Network
members with over $20 million in grants and a wide
range of technical assistance. NALCAB has also
trained more than 1,000 practitioners and graduated
137 next generation Latino leaders from the Pete Garcia Community Development Fellowship. With NALCAB’s support, member organizations have secured
more than $400 million for affordable housing, small
business, and financial capability programs. NALCAB
has also influenced how local and federal government
agencies are deploying hundreds of millions of dollars
for community development and disaster recovery.
A full list of Amici can be found at the end of the
brief.
---------------------------------♦---------------------------------
INTRODUCTION AND
SUMMARY OF ARGUMENT
The CFPB plays an integral role in the nation’s financial system. The Bureau’s work ensures that the
system functions in a manner that is responsive to the
interests of all market participants—consumers, large
financial entities, and smaller institutions like Amici.
Congress’s chosen method of funding the Bureau underpins the Bureau’s ability to do this important work,
4
free from the outsized influence of any one market segment.
Petitioners’ brief convincingly demonstrates that
nothing in the text or history of the Constitution—or
any decisions of this Court—supports the Fifth Circuit’s unprecedented holding that the Bureau’s funding mechanism (and that of many other regulators
including key financial regulators like the Board of
Governors of the Federal Reserve System) is unconstitutional. Amici do not believe that more needs to be
said on that score.
Amici submit this brief, instead, to provide a realworld picture of what is at stake in this case beyond
the pure question as to the meaning of the Appropriations Clause. The Bureau’s role in the financial regulatory system is best understood in the context of the
myriad changes that Congress made to the nation’s
financial regulatory scheme in Title X of the DoddFrank Wall Street Reform and Consumer Protection
Act (“Dodd-Frank”), changes carefully calibrated to address shortcomings in that system revealed by the
2008 financial crisis and Great Recession. In the
twelve years since its inception, the Bureau has carried out its responsibilities under Dodd-Frank to
achieve Congress’s purposes. This is illustrated, in
part, by the work the Bureau has done to be responsive
to the unique needs of smaller financial institutions,
including credit unions and CDFIs like the Amici, allowing these institutions to compete more effectively
for consumers’ business against larger institutions.
5
Understanding the judgments Congress made,
and the role that the Bureau plays within the regulatory system, further demonstrates why this Court
should not overturn Congress’s decision with respect
to the appropriate method of funding the CFPB’s operations. Indeed, a decision striking down that funding
mechanism would cause significant disruption to the
regulatory system, to the severe detriment of financial
institutions like Amici and the consumers they serve.
---------------------------------♦---------------------------------
ARGUMENT
I.
THE BUREAU PLAYS AN INTEGRAL ROLE
IN REGULATING THE FINANCIAL SECTOR—PROTECTING AGAINST THE RISK
OF ANOTHER SYSTEMIC FAILURE.
The relevance of the Bureau and its funding mechanism cannot be divorced from the events that
prompted Congress to create the Bureau: the 2008 financial crisis and concerns regarding the role regulatory arbitrage played in allowing that crisis to occur.
Those events revealed the dysfunction of the fragmented regulatory system that existed prior to the financial crisis, and the conflicting interests that can
arise when regulators are simultaneously responsible
for the safety and soundness of financial institutions
and for protecting consumers from abuses by such institutions. Congress thus determined there was a need
to consolidate regulatory authority in a single agency
with the sole mission of “implement[ing] and, where
6
applicable, enforce[ing] Federal consumer financial
law consistently.” 12 U.S.C. § 5511(a).
To protect the Bureau’s independence and prevent
potential regulatory capture, Congress saw fit to fund
the Bureau in the same manner as most of the agencies whose authority was being consolidated into the
Bureau: through a standing appropriation. Using this
time-tested method for protecting the ability of financial regulatory agencies to exercise their authority unhesitatingly and without fear of the power of large
financial institutions, Congress protected the Bureau’s
ability to oversee the consumer financial marketplace
and promote financial stability.
A. Congress Created the Bureau to Replace the Patchwork Regulatory Regime that Allowed the 2008 Financial
Crisis to Occur.
The 2008 financial crisis devastated the economy:
Americans lost approximately 7 million homes to foreclosure; 8 million jobs; and $13 trillion in household
wealth, including retirement, college, and other savings. S. REP. NO. 111-176, at 228 (2010). As recognized
by the Senate Committee on Banking, Housing and
Urban Affairs (“Committee”), the crisis illustrated “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.
7
In response, Congress enacted Dodd-Frank with
the “primary purpose” being to “promote the financial
stability of the United States.” Id. at 2. As part of its
effort to replace the then-existing bank regulatory
scheme that too often emphasized “the short-term
profitability of the banks at the expense of consumer
protection,” Congress created the Bureau to “establish
a basic, minimum federal level playing field for all
banks and, for the first time, non-depository financial
companies that sell consumer financial products and
services to American families.” Id. at 10-11.
In the forty years preceding the enactment of DoddFrank, beginning with the Truth in Lending Act in
1968, Congress had enacted roughly twenty separate
laws (and innumerable amendments) aimed toward
protecting consumers in the financial marketplace.
These laws spanned numerous markets, touching on
housing finance,2 education finance,3 credit cards,4
See, e.g., the Home Owners Protection Act of 1998 (12
U.S.C. §§ 4901 et seq.); the Alternative Mortgage Transaction
Parity Act of 1982 (12 U.S.C. §§ 3801 et seq.); the Home Mortgage
Disclosure Act of 1975 (12 U.S.C. §§ 2801 et seq.) (Prior to the
law’s transfer to the CFPB, regulatory authority was vested in
the Federal Reserve Board and enforcement authority in multiple
agencies.); the Home Ownership and Equity Protection Act of
1994 (15 U.S.C. § 1601); and the S.A.F.E. Mortgage Licensing Act
of 2008 (12 U.S.C. §§ 5101 et seq.).
3
See, e.g., Higher Education Opportunity Act (15 U.S.C. § 1650).
4
See, e.g., Credit Card Accountability, Responsibility and
Disclosure Act, Pub. L. No. 111-24, 123 Stat. 1734 (2009); Fair
Credit Billing Act (15 U.S.C. §§ 1661 et seq.).
2
8
checking and savings accounts,5 debt collection,6 auto
leases,7 and many others. They included disclosure requirements, substantive regulations, and prohibitions
on unfair or deceptive practices8 and discrimination
with respect to credit.9
These statutes contained a myriad of different approaches to implementation and enforcement, and created confusion and inconsistency regarding both. For
example, although most of these statutes vested rulemaking authority in the Federal Reserve Board (see,
e.g., the Home Mortgage Disclosure Act of 1975, supra
note 2, and the TILA supra note 7), some vested authority in other agencies such as the Federal Trade
Commission (“FTC”) (see, e.g., the Gramm-Leach Bliley
Act, Pub. L. No. 106-102, 113 Stat. 1338) and the U.S.
Department of Housing and Urban Development
(“HUD”) (see, e.g., the Real Estate Settlement Procedures Act of 1974, Pub. L. No. 93-533, 88 Stat. 1724).
And still others vested more than one agency with
See, e.g., Truth in Savings Act (12 U.S.C. §§ 4301 et seq.);
Electronic Fund Transfer Act (15 U.S.C. §§ 1693 et seq.).
6
See, e.g., The Fair Debt Collection Practices Act (“FDCPA”),
Pub. L. No. 95-109, 91 Stat. 874 (1977); 15 U.S.C. §§ 1692 et seq.
7
See, e.g., the Truth in Lending Act (“TILA”), Pub. L. No. 90321, 82 Stat. 146; 15 U.S.C. § 1604(a). Rulemaking authority under TILA was initially vested in the Federal Reserve Board.
8
FTC Act § 5 (15 U.S.C. § 45).
9
Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. §§ 1691
et seq. Authority over ECOA was initially vested in both the Federal Reserve Board and the FTC.
5
9
authority. See, e.g., the FTC Act, supra note 8; ECOA,
supra note 9.
Similarly, the authority to monitor regulatory
compliance and remedy violations was split across
multiple agencies. With regard to depository institutions, for example, the Federal Deposit Insurance Corporation (“FDIC”) was responsible for state-chartered
banks, the Office of the Comptroller of Currency
(“OCC”) for national banks, the Office of Thrift Supervision (“OTS”) for federally chartered savings associations, the National Credit Union Administration
(“NCUA”) for credit unions,10 and the Federal Reserve
System for bank holding companies.11 Responsibility
for non-depository institutions was vested in the FTC,
but the agency lacked the ability to conduct examinations, which greatly limited its effectiveness. See generally Chapter 311 of the 63rd Congress, 38 Stat. 717,
September 26, 1914 (establishing the FTC). HUD,
meanwhile, had overlapping jurisdiction over both depository and non-depository financial institutions under certain statutes relating to mortgage originations
and servicing.
This patchwork approach to financial regulation
both opened the door to regulatory arbitrage and created regulatory vacuums, which together contributed
Act of Mar. 10, 1970, Pub. L. No. 91-206, 84 Stat. 49, Sec.
6 (transferring all functions of the Bureau of Federal Credit Unions to the NCUA).
11
Levitin, supra p. 8 at note 116.
10
10
to the events that led to the financial crisis. As the
Committee found:
This fragmentation led to regulatory arbitrage between federal regulators and the
states, while the lack of any effective supervision on nondepositories led to a “race to the
bottom’’ in which the institutions with the
least effective consumer regulation and enforcement attracted more business, putting
pressure on regulated institutions to lower
standards to compete effectively, “and on their
regulators to let them.”
S. REP. NO. 111-176, at 10 (quoting Testimony of Michael Barr, Assistant Secretary of the Treasury for Financial Institutions, to the Senate Committee on
Banking, Housing, and Urban Affairs, July 14, 2009).
Scholars have likewise noted that the piecemeal approach to regulation that existed in 2008 created competition for the most-lax regulation, with regulated
institutions shopping for charters among agencies. See
Adam J. Levitin, The Politics of Financial Regulation
and the Regulation of Financial Politics: A Review
Essay, 127 HARV. L. REV. 1991, 2042 (2014).
The Bureau was created explicitly to avoid a repetition of these systemic failures:
The CFPB will stop regulatory arbitrage. It
will write rules and enforce those rules consistently, without regard to whether a mortgage, credit card, auto loan, or any other
consumer financial product or service is sold
by a bank, a credit union, a mortgage broker,
11
an auto dealer, or any other non-depository financial company.
S. REP NO. 111-176, at 11.
To effectuate that goal, Dodd-Frank enumerated
eighteen separate consumer financial protection laws,
12 U.S.C. § 5481(12), and granted the Bureau extensive authority to, among other things, “supervise[ ] covered persons for compliance with” such laws, “tak[e]
appropriate enforcement action to address violations”
thereof, and “issu[e] rules, orders, and guidance implementing” these laws, 12 U.S.C. § 5511(c)(4), (5). In doing so, Congress amended each of the enumerated
federal consumer financial protection laws to substitute the Bureau for one of the other agencies that had
exercised authority under that statute.12 Additionally,
Congress expressly transferred from each of the regulators “[a]ll consumer financial protection functions”—
defined to mean “all authority to prescribe rules or
Pub. L. No. 111-203, 124 Stat. 1376 §§ 1083 (Alternative
Mortgage Transaction Parity Act); 1084 (Electronic Fund Transfer Act); 1085 (Equal Credit Opportunity Act); 1086 (Expedited
Funds Availability Act); 1087 (Fair Credit Billing Act); 1088 (Fair
Credit Reporting Act and Fair and Accurate Credit Transactions
Act); 1089 (Fair Debt Collection Practices Act); 1093 (GrammLeach Bliley Act); 1094 (Home Mortgage Disclosure Act); 1095
(Homeowners Protection Act of 1998); 1096 (Home Ownership
and Equity Protection Act of 1994); 1097 (Omnibus Appropriations Act, 2009); 1098 (Real Estate Settlement Procedures Act of
1974); 1099 (Right to Financial Privacy Act of 197); 1100 (Secure
and Fair Enforcement for Mortgage Licensing Act of 2008); 1100A
(Truth in Lending Act); 1100B (Truth in Savings Act); 1100C
(Telemarketing and Consumer Fraud and Abuse Prevention Act);
1100E (Adjustments for Inflation in the Truth in Lending Act (2010)).
12
12
issue orders or guidelines pursuant to any Federal consumer financial law” and the authority to “conduct examinations for compliance with Federal consumer
financial laws.” 12 U.S.C. § 5581(a)(1), (c)(1). Congress
carved out of the transfer of examination authority depository institutions with $10 billion or less in assets,
meaning that such institutions are subject to rules
promulgated by the CFPB but their compliance with
such rules is monitored by their prudential regulator.13
Congress further amended the Federal Deposit Insurance Act to require the banking regulators to “make a
referral” to the CFPB when one of the agencies “has a
reasonable belief that a violation of an enumerated
consumer financial law . . . has been committed by any
. . . party within the jurisdiction of that . . . agency.”14
At the same time that Congress consolidated all of
these authorities in a single—and single-purpose—
agency, Congress also created, for the first time, federal
supervisory authority over non-depository institutions
to “provide a level playing field” where both depository
and non-depository institutions would be subject to
“uniform rules and consistent enforcement for the benefit of consumers.” S. REP. NO. 111-176, at 229. This,
too, was a response to the financial crisis in which
“non-depository financial companies were among the
Id. § 1061, 12 U.S.C. § 5581. Congress also enacted special
provisions governing the transfer of personnel from the preexisting banking regulators to the CFPB. Pub. L. No. 111-203 § 1064
(2010), 12 U.S.C. § 5584.
14
Pub. L. No. 111-203 § 1090, 12 U.S.C. § 1818(t)(6).
13
13
largest sellers of subprime and exotic mortgages.” S.
REP. NO. 111-176 at 14.
In summary, in the aftermath of the 2008 financial
crisis, Congress consolidated responsibility for protecting consumers in the financial marketplace in a single
agency—the CFPB—and empowered that agency to
regulate even the largest financial institutions in an
independent and impartial manner. It is against this
backdrop that one must consider the role of the Bureau’s funding mechanism in facilitating the Bureau’s
purpose.
B. The Bureau’s Funding Mechanism—
Modeled After Other Financial Regulators—Creates Stability and Predictability.
Congress’s chosen method for funding the Bureau—modeled on the funding methods of similar financial regulators—is integral to effectuating DoddFrank’s central purpose: financial oversight free from
regulatory capture. As the Committee explained, “the
assurance of adequate funding, independent of the
Congressional appropriations process, is absolutely essential to the independent operations of any financial
regulator.” S. REP. NO. 111-176, at 163. This concept is
not novel, nor is the Bureau’s funding mechanism out
of the ordinary for a federal agency, particularly for a
federal financial regulator.
Indeed, all of the banking regulators from which
authority was transferred to the CFPB, many of which
14
have budgets much larger than that of the CFPB,15 are
funded via a standing appropriation, including the
Federal Reserve Board,16 the OCC,17 the FDIC,18 and
the NCUA.19 As the GAO has explained, the federal
banking agencies “are supported almost entirely
through examination or assessment fees on their members, deposit insurance premiums, or interest on asset
holdings, and are not included in the annual congressional appropriations process.” U.S. GEN. ACCT. OFF.,
SEC OPERATIONS: IMPLICATIONS OF ALTERNATIVE FUNDING STRUCTURES 12 (2002). The same is true of the
Federal Housing Finance Agency (“FHFA”), which
oversees the “government sponsored entities” Fannie
Mae and Freddie Mac, and the Federal Home Loan
Banks. 12 U.S.C. § 4516. And, although the Securities
and Exchange Commission (“SEC”) does receive some
funding through annual appropriations, most of its
budget comes from fees collected by the agency, making
it a narrow exception at best. SEC OPERATIONS, supra,
at 7 (Fig. 1).
The Fifth Circuit’s emphasis on the Bureau’s supposedly unique “double insulation” is misplaced. Cmty.
Fin. Servs. Assoc. of Am. v. Consumer Fin. Prot. Bureau,
No. 21-50826, at 30 (5th Cir. 2022). As Petitioners have
noted, the Federal Reserve Board’s role in the Bureau’s
funding is entirely ministerial—that is, it exercises “no
S. REP. NO. 111-176 at 164.
12 U.S.C. §§ 243, 244.
17
12 U.S.C. §§ 16, 481, 482.
18
12 U.S.C. §§ 1815(d), 1820(e).
19
12 U.S.C. §§ 1755(a) and (b).
15
16
15
power over how much money the CFPB receives” and
“thus in no way insulates the CFPB from congressional
control” as “Congress is free to modify the Bureau’s
funding at any time.” Pet’rs’ Br. at 34. Indeed, Congress
can change the Bureau’s funding by legislating with
respect to the Federal Reserve Board’s funding, as well
as through legislation directly involving the Bureau’s
funding or operations, as Congress has indeed done
on more than one occasion.20 And as noted by other
briefs filed in support of Petitioners, the court of appeals’ characterization ignores the many controls and
guardrails Congress maintains over the agency’s
budget.21
The CFPB’s budgetary mechanism creates stability and predictability and enables the Bureau to discharge its functions in an independent and impartial
manner. This benefits CDFIs, credit unions, and their
customers who typically have less access to the political decisionmakers than large financial institutions.
See Levitin, supra p. 8 at 2044 (noting that the
See Consolidated Appropriations Act 2016, Pub. L. No.
114-113, 129 Stat. 2242 div. O § 704 (2015), codified at 12 U.S.C.
§ 5493(h); Department of Defense and Full Year Appropriations
Act 2011, Pub. L. No. 112-10, 125 Stat. 38 div B.
21
For instance, Congress capped the CFPB’s budget to
twelve percent of the Federal Reserve Board’s operating expenses
as of fiscal year 2013, subject to an annual inflation adjustment
pursuant to a formula Congress enacted; the Director must seek
permission from the President and both chambers of Congress to
appropriate any amounts above this statutory limit. 12 U.S.C.
5497(a)(2)(A)(iii), (a)(2)(B), (e)(1). Meanwhile, Congress imposed
no cap on other financial regulators, including the OCC and the
FRB. 12 U.S.C. § 16; 12 U.S.C. § 243.
20
16
financial services industry exercises “considerable political clout, in large part through massive political
campaign donations and lobbying”). This is especially
important as Amici serve underserved communities
who are vulnerable to financial exploitation and often
better served by small institutions able to meet their
unique needs.
II.
THE BUREAU HAS DEVELOPED AN EXTENSIVE BODY OF RULES, POLICIES,
AND PRACTICES ON WHICH CONSUMERS
AND SMALL FINANCIAL INSTITUTIONS
LIKE AMICI RELY.
In its twelve-year history, the Bureau has exercised its authority—through rulemaking, guidance, enforcement, and consumer complaint handling—to
establish a regulatory scheme on which consumers and
financial institutions of all sizes rely. The Bureau’s
funding mechanism has played an important role in
the construction of this regulatory framework, as illustrated by the Bureau’s responsiveness to the unique
circumstances of different market segments such as
smaller financial institutions like Amici and the Bureau’s demonstrated ability to hold all financial institutions, including large financial institutions,
accountable for their actions.
17
A. The Bureau Has Used Its Authority to
Issue Rules, Orders, and Guidance to
Facilitate Compliance with the Federal
Consumer Financial Laws by Smaller
Financial Institutions and to Protect
Consumers.
Since its inception, the Bureau been vital to facilitating compliance with federal consumer financial
laws, especially by smaller institutions like Amici that
serve underserved consumers. The Bureau has used its
authority, as described in the preceding section, to issue rules and provide other guidance that has not only
protected consumers, but also allowed financial institutions to operate effectively. Of particular relevance is
the CFPB’s work to implement the Mortgage Reform
and Anti-Predatory Lending Act, which Congress enacted as Title XIV of Dodd-Frank, effectively amending
several laws. In the weeks before these amendments
went into effect,22 the CFPB—following notice-andcomment rulemaking—issued six rules that, together,
provided clarification and gave financial institutions
additional time to develop policies and procedures to
comply with their new obligations.23 Those rules have
Congress established a January 2013 effective date for
those amendments but authorized the CFPB to postpone that
date for up to a year if it issued implementing regulations beforehand. Pub. L. No. 111-203, § 1400(c).
23
See 78 Fed. Reg. 4725 (issued on Jan. 10, 2013) (“Escrow
Requirements under the Truth in Lending Act”); 78 Fed. Reg.
6855 (issued on Jan. 10, 2013) (“High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act
(Regulation Z) and Homeownership Counseling Amendments to
the Real Estate Settlement Procedures Act (Regulation X)”); 78
22
18
been widely recognized as bringing stability to the
mortgage market after a period of extreme distress.24
Of particular relevance to Amici, several of the
CFPB’s mortgage rules created exemptions for smaller
financial institutions—exemptions that were entirely
in-line with Congress’s express recognition that rules
appropriate for large lenders serving hundreds of
thousands or millions of consumers are not necessarily
appropriate for community organizations serving a
much smaller, local population.25 Likewise, the CFPB
Fed. Reg. 10695 (issued on Jan. 17, 2013) (“Mortgage Servicing
Rules Under the Real Estate Settlement Procedures Act”); 78 Fed.
Reg. 7215 (issued on Jan. 18, 2013) (“Disclosure and Delivery Requirements for Copies of Appraisals and Other Written Valuations Under the Equal Credit Opportunity Act”); 78 Fed. Reg.
10367 (issued on Jan. 18, 2013) (“Appraisals for Higher-Priced
Mortgage Loans”); 78 Fed. Reg. 11279 (issued on Jan. 20, 2013)
(“Loan Originator Compensation Requirements under the Truth
in Lending Act (Regulation Z)”).
24
See, e.g., Br. of the Mortgage Bankers Association in Seila
Law v. CFPB, No. 19-7 at 10 (explaining a decision calling into
question the validity of the CFPB’s mortgage rules “could be catastrophic for the real estate finance industry” and “mortgage markets would very likely all but grind to a halt”).
25
For example, Section 1481 of the Dodd-Frank Act amended
the Truth in Lending Act to require that lenders establish an escrow account for the payment of taxes and property insurance for
certain mortgage transactions. 15 U.S.C. § 1639d. But Congress
authorized the CFPB to exempt creditors operating “predominantly in rural or underserved areas” if the creditors’ total mortgage originations and asset size were below thresholds set by the
CFPB. The CFPB issued a regulation defining those thresholds,
78 Fed. Reg. 4726, and it subsequently loosened the criteria in
response to Congressional action amending the authorizing statute and based upon the Bureau’s own experience. 80 Fed. Reg.
59944. The CFPB has similarly tailored other mortgage rules to
19
promulgated rules tailoring certain requirements to
accommodate the business needs of smaller institutions.26
After finalizing these mortgage rules, the CFPB
proceeded to issue a set of “Small Entity Compliance
Guides” to translate the regulations into terms that
business and compliance officials could more readily
understand and use to develop compliance programs.27
The CFPB developed a regulatory implementation
program, through which it engaged with financial
accommodate small financial institutions. See, e.g., 12 C.F.R.
§ 1026.43(b) (exemption from ability-to-pay requirement for Community Development Financial Institutions, Community Housing
Development Organizations, and tax-exempt entities meeting
certain conditions); 12 C.F.R. §§ 1026.41(e)(4), 1030(b) (exemption from servicing requirement for entities meeting definition of
small servicer).
26
For instance, Section 1411 of the Dodd-Frank Act amended
the Truth in Lending Act to make it unlawful to make a mortgage
loan unless the creditor makes a reasonable and good faith determination that that the consumer has the ability to repay the loan.
15 U.S.C. § 1639c(a). Section 1412, in turn, created a presumption
of compliance with this requirement with respect to loans that are
“qualified mortgages” as defined in that section and in regulations
to be issued by the CFPB. Id. § 1639c(b). In defining the term
qualified mortgage, Congress excluded loans that result in a balloon payment but authorized the CFPB to include balloon-payment loans as qualified mortgages so long as they meet the
criteria for the authorized exemption to the escrow requirement.
See supra note 25; 15 U.S.C. § 1639c(b)(2)(E). The CFPB elected
to allow such loans to be treated as qualified mortgages, recognizing that small lenders are not able to make 30-year fixed rate
mortgages. 12 C.F.R. § 1026.43(f ).
27
See Compliance Resources, CFPB, available at https://www.
consumerfinance.gov/compliance-resources/ (last visited May 11,
2023).
20
institutions—including organizations like Amici—to
answer questions, provide guidance, and assist with
implementation.28 And where the CFPB has concluded
that further clarity or adjustments were needed, it has
amended its rules to address such issues.29
This same story can be told with respect to regulations the CFPB has issued to implement other provisions of the Dodd-Frank Act, including its rules
governing international remittances,30 mortgage reporting,31 and small business lending reporting.32 In
each case, the Bureau’s implementing regulations created exemptions for smaller financial institutions as
envisioned by Congress.33
Moreover, the CFPB has continued to play a vital
role in facilitating compliance with consumer financial
See Remarks of Richard Cordray to the American Bankers
Association, April 3, 2014, available at https://www.consumer
finance.gov/about-us/newsroom/prepared-remarks-of-cfpb-directorrichard-cordray-at-the-american-bar-association/.
29
See, e.g., 78 Fed. Reg. 35430 (June 12, 2013) (amending
ability-to-pay rule); 78 Fed. Reg. 44686 (July 24, 2013) (amending
mortgage servicing rule); 78 Fed. Reg. 60382 (Oct. 1, 2013)
(amending multiple rules).
30
See generally Section 1073 of the Dodd-Frank Act, 15
U.S.C. § 1693o-1.
31
See generally Section 1094 of the Dodd-Frank Act, 12
U.S.C. § 2802.
32
See generally Section 1071 of the Dodd-Frank Act, 15
U.S.C. § 1691o-2.
33
See 12 C.F.R. § 1005.30(f ) (remittance exemption); 12
C.F.R. § 1003.3(d) (mortgage disclosure exemption); 12 C.F.R.
§ 1002.105(b) (small business reporting exemption).
28
21
protection laws by providing necessary clarifications
and reconciliations. In doing so, the CFPB has taken
into consideration the specific needs of various entities
including small financial institutions like Amici. For
example, in 2018, Congress enacted the Economic
Growth, Regulatory Relief, and Consumer Protection
Act, Pub. L. No. 115-174, which, among other things,
relieved certain financial institutions of some reporting requirements for home mortgages.34 Within a few
months, the CFPB issued an interpretive rule clarifying the specific types of data these financial institutions were no longer required to report. 83 Fed. Reg.
45325. Similarly, just last month, after Congress enacted the Adjustable Interest Rate (“LIBOR”) Act,35 the
CFPB issued an interim final rule to conform regulations implementing the Truth in Lending Act with the
LIBOR Act.36
The CFPB’s funding mechanism ensures that consumer interests are taken into account alongside those
of large and small financial institutions. That was true,
The CFPB had provided a complete exemption from reporting for financial institutions that originated 25 or fewer
closed-end loans or 100 or fewer open-end lines of credit. 80 Fed.
Reg. 66128 (Oct. 28, 2015). Congress added to this an exemption
from reporting certain data elements for institutions originating
500 or fewer loans or lines of credit. Pub. L. No. 115-174, 132 Stat.
1296 § 104.
35
Pub. L. No. 117-103, 136 Stat. 49 div. U.
36
The CFPB rule has not yet been published in the Federal
Register but can be viewed at https://files.consumerfinance.gov/f/
documents/cfpb_facilitating-libor-transition-libor-act-regulation-z_
2023-04.pdf.
34
22
for example, of the mortgage rules and the remittance
rule previously discussed. And that continues to be
true today. For example, just last year, Congress passed
the Debt Bondage Repair Act, which prohibits credit
reporting companies from issuing reports for the victims of trafficking that include negative information
caused by the trafficking.37 Six months later, the CFPB
issued an interim final rule clarifying for survivors the
process required to exercise their rights under the law
and clarifying for credit reporting agencies their obligations. 87 Fed. Reg. 37700. And just over two weeks
ago, after conducting a study of property assessed
clean energy (“PACE”) loans which found that these
loans increase property tax bills by 88% and lead to a
35% increase in mortgage delinquencies,38 the CFPB
issued a proposed rule to require PACE lenders to assess consumers’ ability to repay before making these
loans.39
In sum, the CFPB has played—and continues to
play—precisely the role that Congress envisioned: by
listening and being responsive to all participants
within the financial system, the CFPB has protected
the stability of the system as a whole. The CFPB’s
This was part of the National Defense Authorization Act.
Pub. L. No. 117-81 § 6102.
38
McAlister and Sandler, CFPB Data Point: Property Assessed Clean Energy (PACE) Financing and Consumer Financial
Outcomes.
39
88 Fed. Reg. 30388 Residential Property Assessed Clean
Energy Financing (Regulation Z) (proposed May 1, 2023) (to be
codified at 12 C.F.R. § 1026).
37
23
funding mechanism has played a key role in this success.
B. The Bureau’s Funding Mechanism Has
Enabled the Bureau to Hold All Entities
Within Its Jurisdiction—Including Large
Financial Institutions—Accountable.
The CFPB has two tools for ensuring compliance
with federal consumer financial laws: supervisory examinations (which are confidential) and enforcement
actions (which are public).40 As of 2017, roughly 60% of
examinations were resolved through confidential supervisory action while the other approximately 40%
led to an enforcement investigation.41 The CFPB’s enforcement record illustrates the propriety of Congress’s decision to fund the CFPB in the same manner
it funds other banking regulators: with a standing appropriation.
A series of actions involving Wells Fargo, the nation’s third largest bank with almost $1.9 trillion in
assets, provides a compelling case in point. Three
CFPB Directors have brought enforcement cases
against, and entered into consent orders with, Wells
Fargo. In the first, brought by Director Cordray in
2016, the company agreed to pay a $100 million fine for
opening deposit and credit card accounts without the
See 12 U.S.C. §§ 1024, 1025 (supervision), 1051-1057 (enforcement).
41
Supervisory Highlights Summer 2017, available at
https://files.consumerfinance.gov/f/documents/201709_cfpb_
Supervisory-Highlights_Issue-16.pdf.
40
24
authorization of the consumers in whose name the accounts were opened.42 In the second, brought by Acting
Director Mulvaney in 2018, the company agreed to pay
a $1 billion fine based on findings that it had overcharged consumers on mortgages and auto loans.43 And
in the third, brought by Director Chopra in 2022, the
company agreed to pay over $2 billion in consumer redress and a $1.7 billion fine based upon findings of violations across multiple product lines.44
But the actions involving Wells Fargo are just one
example. The CFPB has shown a continued willingness to take action when it has uncovered legal violations following a supervisory examination or
investigation, as demonstrated by enforcement actions
against many of the nation’s largest banks including
JP Morgan Chase, Bank of America, and Citibank.45
In re Wells Fargo Bank N.A., 2016-CFPB-0015, https://files.
consumerfinance.gov/f/documents/092016_cfpb_WFBconsentorder.pdf
43
In re Wells Fargo Bank N.A., 2019-BCFP-0001, https://files.
consumerfinance.gov/f/documents/cfpb_wells-fargo-bank-na_
consent-order_2018-04.pdf
44
In re Wells Fargo Bank N.A., 2022-CFPB-0011, https://files.
consumerfinance.gov/f/documents/cfpb_wells-fargo-na-2022_
consent-order_2022-12.pdf
45
See, e.g., In re JP Morgan Chase Bank N.A., 2013-CFPB0007; In re JP Morgan Chase Bank N.A., 2017-CFPB-0015; In re
Chase Bank USA N.A., 2015-CFPB-0013; In re Bank of America
N.A., 2022-CFPB-0004; In re Bank of America N.A., 2022-CFPB0002; In re Bank of America N.A., 2014-CFPB-0004; In re Citibank N.A., 2018-BCFP-0003; In re Citibank N.A., 2016-CFPB0003; In re Citibank N.A., 2015-CFPB-0015; In re Citibank N.A.,
2017-CFPB-0021; In re CitiMortgage Inc., 2017-CFPB-0005.
42
25
Similarly, the CFPB has demonstrated its willingness to hold large, non-depository financial institutions
accountable. Dodd-Frank authorized the CFPB to supervise non-depositories that are “larger participants”
in a consumer finance market. The Bureau has
adopted at least five “larger participant rules,”46 enabling the Bureau to supervise large debt collection
agencies, consumer report agencies, auto finance companies, student loan servicers, and international
money transmitters. 12 C.F.R. §§ 1090.104-108.
The CFPB has taken its responsibility for overseeing large, non-depository financial institutions seriously, both via supervisory actions, as demonstrated in
the CFPB’s Supervisory Highlights,47 and enforcement
actions. For example, the CFPB has filed suit against,
and entered into consent orders with, two of the largest
See 77 Fed. Reg. 42873 (July 20, 2012) (defining “Larger
Participants of the Consumer Reporting Market”); 77 Fed. Reg.
65775 (Oct. 31, 2012) (defining “Larger Participants of the Consumer Debt Collection Market”); 78 Fed. Reg. 73383 (Dec. 6, 2013)
(defining “Larger Participants of the Student Loan Servicing
Market”); 79 Fed. Reg. 56631 (Sept. 23, 2014) (defining “Larger
Participants of the International Money Transfer Market”); 80
Fed. Reg. 37495 (June 30, 2015) (defining “Larger Participants of
the Automobile Financing Market”).
47
See, e.g., Supervisory Highlights Student Loan Servicing
Special Edition (2022), available at https://files.consumer
finance.gov/f/documents/cfpb_student-loan-servicing-supervisoryhighlights-special-edition_report_2022-09.pdf; Supervisory Highlights Consumer Reporting Special Edition (2019), available at
https://files.consumerfinance.gov/f/documents/cfpb_supervisoryhighlights_issue-20_122019.pdf.
46
26
debt collectors48 and each of the three national consumer reporting agencies.49 Similarly, the CFPB currently is engaged in litigation against what was one of
the largest student loan servicers,50 one of the largest
money transmitters,51 and the largest subprime auto
lender.52
As these examples make clear, with a standing appropriation, the CFPB has functioned precisely as the
Congress envisioned—as an independent and effective
regulator.
CFPB v. Portfolio Recovery Associates, 2-23-civ-00110
(E.D. Va.) (stipulated final judgment and order); In re Portfolio
Recovery Associates, 2015-CFPB-0023; Bureau of Consumer Financial Protection v. Encore Capital Group, No. 20-civ-01750
(S.D. Cal. Oct. 15, 2020) (stipulated final judgment and order);
In re Encore Capital Group, 2015-CFPB-0022.
49
In re Experian Holdings Inc., 2017-CFPB-0012; Bureau of
Consumer Financial Protection v. Equifax Inc., No. 1:19-cv-03300TWT (N.D. Ga. July 22, 2019) (stipulated final judgment and order); In re Equifax Inc., 2017-CFPB-0001; In re TransUnion Inc.,
2017-CFPB-0002.
50
CFPB v. Navient Corp., No. 3:17-CV-101, 2017 WL
3380530 (M.D. Pa. Aug. 4, 2017).
51
CFPB v. MoneyGram International, No. 1-22-civ-0325
(filed Apr. 21. 2022, S.D.N.Y.).
52
CFPB v. Credit Acceptance Corp., No. 1:23-civ-0038 (filed
Jan. 4, 2023 S.D.N.Y.).
48
27
III. A RULING THAT INTERRUPTS THE CFPB’S
OPERATIONS WOULD CAUSE MASSIVE
DISRUPTION TO THE REGULATORY SYSTEM TO THE DETRIMENT OF FINANCIAL
INSTITUTIONS LIKE AMICI AND THE CONSUMERS THEY SERVE.
As discussed herein, the CFPB’s role in regulating
the consumer financial system—worth trillions of dollars—is significant. An adverse ruling suspending the
CFPB’s operations would create chaos for market participants, threatening to upend the entire system.
Of course, if the Court were to find a constitutional
defect in the CFPB’s funding mechanism, it could sever
specific provisions, permitting the CFPB to continue
to function with funding through the Federal Reserve.
Petitioners’ brief identifies three such provisions
whose severance would seem to satisfy the Fifth Circuit’s concerns. Pet’rs’ Br. at 41. But any ruling that
interrupts the CFPB’s operations would have dire consequences.
We do not go so far as to consider the market implications of an adverse ruling in this case on other financial regulators. As previously explained, we agree
with Petitioners that there is no principled basis for
distinguishing the CFPB’s funding from that of the
Board of Governors of the Federal Reserve System, the
FDIC, the OCC, or the NCUA. But even if the decision
here could somehow be cabined to the CFPB, the impact would be significant.
28
First and foremost, such a ruling would create a
regulatory vacuum for large banks which, due to their
size, pose the greatest threat to financial stability. Not
only would this pose a tremendous risk to consumers,
it would create a troubling mismatch in which the largest banks (those with more than $10 billion in assets)
had no oversight (Dodd-Frank vested the Bureau with
exclusive authority for their oversight), while leaving
smaller institutions like Amici subject to banking regulators’ oversight.53 Such a wildly distorted playing
field would significantly undermine the ability of
smaller institutions to function in the marketplace.
Additionally, a ruling that interfered with the
CFPB’s functioning would bring the non-bank supervision program to an immediate halt. One of the key
lessons of the financial crisis was the significant risk
that non-depository financial institutions can pose,
and thus one of the core goals of the Dodd-Frank Act
was to “ensur[e] that . . . Federal consumer financial
law is enforced consistently, without regard to the status of a person as a depository institution.” 12 U.S.C.
§ 5511(b)(4). The CFPB has exclusive authority to conduct supervisory examinations of non-depositories; if
The one exception is that the Dodd-Frank Act left undisturbed the authority of the banking regulators to enforce § 5 of
the FTC Act, 15 U.S.C. § 45, which prohibits unfair or deceptive
acts or practices.” Even there, large banks would be at an advantage since the Dodd-Frank Act prohibits unfair, deceptive or
abusive acts or practices, 12 U.S.C. § 5531, and that broader prohibition would be enforceable only against smaller institutions.
Moreover, there are 18 other consumer financial protection laws
which only the CFPB can enforce against larger banks.
53
29
the CFPB were unable to function, there would be no
federal oversight of these institutions.
Moreover, a ruling that suspends the CFPB’s operations would necessarily suspend the CFPB’s ability
to assist financial institutions in understanding their
legal obligations and complying with the law. Institutions that regularly use the CFPB’s Regulation Inquiries function54 to obtain answers to questions about the
Bureau’s rules and the statutes they implement—a
function particularly useful for smaller institutions
that cannot afford large compliance staffs—would no
longer be able to do so. Nor would financial institutions
have the benefit of the CFPB’s periodic updates to its
Small Entity Compliance Guides, Supervisory Highlights, Circulars,55 or other forms of guidance. Likewise, an adverse ruling would stop in their tracks the
CFPB’s robust research and consumer education programs. Both programs were mandated by Congress in
Dodd-Frank,56 and the Bureau has become the recognized leader in each of these fields.
Disrupting the CFPB’s operations would also
mean disrupting the CFPB’s ability to continue with
rulemakings it has commenced pursuant to express
Congressional directives,57 as well as its ability to
Compliance Resources, supra note 27.
Consumer Financial Protection Circulars, CFPB, available at https://www.consumerfinance.gov/compliance/circulars/
(last visited May 11, 2023).
56
12 U.S.C. §§ 1013(b)(1), (d), 5511(c)(1), (3), 5512(c)(3)(A).
57
The PACE rulemaking previously discussed is one such
example; it was mandated by § 307 of the Economic Growth,
54
55
30
respond to new and emerging problems through the
rulemaking process. The rules that the CFPB has written would effectively be frozen in place while the world
around it undergoes rapid change. Similarly, the CFPB
would be disabled from acting on any of the approximately 20 petitions for rulemaking it has received in
the past twelve months from trade associations and
consumer advocates alike,58 or from acting in response
to what it learns from Requests for Information it has
issued, including the most recent one seeking information regarding the collection and sale of consumer
information, 88 Fed. Reg. 16951. Indeed, the CFPB
would not even be able to issue the annual inflation
adjustments provided for by statute that determine,
for example, the size of permissible fees under the Fair
Credit Reporting Act,59 or the scope of an exemption
from the Home Mortgage Disclosure Act.60
Finally, any ruling that interrupts the CFPB’s
operations would mean suspending the CFPB’s
Regulatory Relief and Consumer Protection Act, Pub. L. No.
115-174, 15 U.S.C. § 1639c(b)(3). The Bureau also has initiated
a rulemaking to implement § 1033 of the Dodd-Frank Act, 12
U.S.C. § 5533, which provides that “Subject to rules prescribed
by the Bureau, a covered person shall make available to a consumer, upon request, information in the control or possession
of the covered person concerning the consumer financial product or service that the consumer obtained from such covered person.”
58
The rulemaking petitions can be accessed at
https://www.consumerfinance.gov/rules-policy/petitions-rulemaking/.
59
15 U.S.C. § 1681j(f )(2).
60
12 U.S.C. § 2808(b).
31
consumer complaint function, also mandated by Congress.61 In 2022, the CFPB received almost 900,000
complete, bona fide complaints from individual consumers or their representatives. Consumers obtained
responses to almost 800,000 of those complaints, many
resulting in monetary or non-monetary relief.62 None
of this could continue if the CFPB’s operations were
suspended.
In sum, a ruling that prevents the CFPB from continuing to function would have far-reaching effects.
Anyone who uses a consumer financial product or service—anyone with a bank account, a credit card, a
mortgage, auto loan, or personal loans—would be at
risk. The risk extends beyond consumers, however.
Providers of financial products and services, especially
small institutions like Amici, would struggle to function in a marketplace where the largest players had
free reign and none of the players had a steady source
of guidance. Such a result can and should be avoided
at all costs.
---------------------------------♦---------------------------------
12 U.S.C. §§ 1013(b)(3), 5534.
CFPB, Consumer Response Annual Report 2022, available
at https://files.consumerfinance.gov/f/documents/cfpb_2022-consumerresponse-annual-report_2023-03.pdf.
61
62
32
CONCLUSION
For the foregoing reasons, the judgment of the
court of appeals should be reversed.
May 15, 2023
Respectfully submitted,
RICHARD A. KOFFMAN*
EMMY L. LEVENS
ZACHARY I. KROWITZ
TRENT M. REHUSCH
COHEN MILSTEIN SELLERS &
TOLL PLLC
1100 New York Ave. NW
Washington, DC 20005
(202) 408-4600
rkoffman@cohenmilstein.com
CLAIRE L. TORCHIANA
COHEN MILSTEIN SELLERS &
TOLL PLLC
88 Pine Street
New York, NY 10005
(212) 838-7797
*Counsel of Record
Counsel for Amici Curiae
CDFI, Credit Union, and Industry Association
Amici:
Accompany Capital Asian Real Estate
Association of America
BLDS
BOC Capital
Business Outreach Center Network
The Center for Responsible Lending (“CRL”)
Coastal Enterprises, Inc.
33
GreenLyne
National Association of Hispanic Real Estate
Professionals
National Association for Latino Community
Asset Builders (“NALCAB”)
New York State CDFI Coalition
Oweesta
Raza Development Fund
Self-Help
Solas AI
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