Payday Lending Association Pushes Supreme Court to Uphold CFPB Ruling

Trade group representing payday lenders files SCOTUS brief saying decision on constitutionality should not be overturned.

The U.S. Supreme Court should reject a request to review an appellate court’s decision that the CFPB is illegally constituted because it is not subject to congressional appropriations, a trade association said Friday.

“The CFPB’s unique funding scheme constitutes a deliberate effort to circumvent the role the Appropriations Clause assigns to Congress in preserving the separation of powers,” the Consumer Financial Services Association of America (CFSA), a group representing payday lenders, stated in a brief filed with the high court.

Background

In October, a three-judge panel from the Fifth Circuit Court of Appeals ruled that the process for funding the CFPB was unconstitutional.

The CFSA and its Texas affiliate had filed suit against the agency, challenging its payday lending rule.

And in deciding that the funding process was illegal, the appeals court ruled that the payday lending rule also was illegal, a decision that could call into question all CFPB rules and examinations since the agency was created in Dodd-Frank.

The CFPB and Biden Administration have asked the Supreme Court to overturn the ruling.

Inside the Brief

However, the court should reject that request for several reasons, the CFSA wrote in its response.

In enacting Dodd-Frank in 2010, Congress abdicated its fiscal power over the CFPB—allowing the agency to fund itself by drawing money from the Federal Reserve, the payday lending group said.

The association added that the agency is unlike other financial regulators that likewise do not go through the appropriations process; those agencies are funded by fees or assessments paid by credit unions and banks.

If the Supreme Court does not want to decide on the constitutionality of the CFPB’s funding mechanism, the CFSA offered two other ways it could void the payday lending rule.

First, the brief suggests, the court could find the rule unconstitutional because it was issued by former Director Richard Cordray, an Obama Administration appointee. The court has ruled that Cordray’s position was unconstitutional because Congress had decided to allow the agency director to only be removed for cause.

That attempt to insulate the agency from political pressure was not constitutional, the Supreme Court decided, ruling that a president could remove a CFPB director at will.

Further, the CFSA said, the high court could decide that the rule should be vacated because it does not meet the statutory definition of “unfair” or “abusive” conduct.