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Written By Digital Content Editor Thomas Ahearn
On May 15, 2023, a coalition of Attorneys General from 24 states submitted an amicus brief to the Supreme Court of the United States (SCOTUS) asking SCOTUS to overturn a decision by the U.S. Court of Appeals for the Fifth Circuit that threatens the future operation of the Consumer Financial Protection Bureau (CFPB).
The case – Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited – involves the issue of whether the Court of Appeals erred in holding that the statute providing funding to the CFPB – 12 U.S.C. § 5497 – violates the Appropriations Clause in Article I, Section 9 of the U.S. Constitution.
The Attorneys General from 24 states submitted the amicus brief to SCOTUS “principally to explain that no matter how this Court resolves the parties’ dispute over the Appropriations Clause,” they “have a compelling interest in preserving the validity of the CFPB’s past and ongoing regulatory and enforcement actions.”
However, the Appeals Cout decision filed in October 2022 noted that “Congress’s decision to abdicate its appropriations power under the Constitution, i.e., to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers. We thus reverse the judgment of the district court.”
The amicus brief was submitted by Arizona, California, Colorado, Connecticut, Delaware, Hawaiʻi, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia.
In February 2023, SCOTUS agreed to take the case that “began as a challenge by the payday-lending industry to a 2017 rule that barred lenders from making additional efforts to withdraw payments from borrowers’ bank accounts after two consecutive failed attempts due to a lack of funds,” according to a SCOTUSblog on the case.
“A three-judge panel of the U.S. Court of Appeals for the 5th Circuit rejected most of the groups’ challenges to the rule, but it ultimately struck down the rule based on the CFPB’s unique funding scheme, which operates outside the normal congressional appropriations process,” explained the blog written by reporter Amy Howe.
“The CFPB receives funding directly from the Federal Reserve, which collects fees from member banks. And that scheme, the court of appeals concluded, violates the Constitution’s appropriations clause, which directs that ‘[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law,’” the blog stated.
In November 2022, the CFPB asked the Supreme Court to take up the case and overrule the lower court’s “unprecedented and erroneous understanding of the Appropriations Clause” because the ruling “calls into question virtually every action the CFPB has taken in the 12 years since it was created,” according to the blog.
After the financial crisis of 2007-2008, the CFPB was created by the “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010” to take action against institutions violating consumer financial laws that include the federal Fair Credit Reporting Act (FCRA) that regulates background checks for employment.
Employment Screening Resources (ESR) is a service offering of ClearStar, a leading Human Resource technology company specializing in background checks, drug testing, and occupational health screening. ClearStar offers background checks for employers that comply with the CFPB and FCRA. To learn more, contact ClearStar.
NOTE: Employment Screening Resources (ESR) – a service offering of ClearStar – does not provide or offer legal services or legal advice of any kind or nature. Any information on this website is for educational purposes only.
© 2023 Employment Screening Resources (ESR) – A Service Offering of ClearStar – Making copies of or using any part of the ESR News Blog or ESR website for any purpose other than your own personal use is prohibited unless written authorization is first obtained from ESR.
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