Attorney General Rob Bonta backs CFPB in case before Supreme Court
(The Center Square) – “As George Mason put it in Philadelphia in 1787, ‘the purse & the sword ought never to get into the same hands,’” so stated in the ruling by the U.S. Court of Appeals for the Fifth Circuit, in the case of Consumer Financial Protection Bureau v. Community Financial Services Association of America.
The decision by the appeals court clarified “These foundational precepts of the American system of government animate the Plaintiffs’ claims in this action. They also compel our decision today.”
The ruling annulled in part a Consumer Financial Protection Bureau”s (CFPB) Fair Debt Collection Rule that prohibits “an unfair and abusive act or practice,” related to the collection of payday and other loans. The case challenged the validity of CFPB’s 2017 Payday Lending Rule.
“The CFPB is the cornerstone of federal consumer financial protections and an important partner to state attorneys general,” said California Attorney General Bonta. Bonta as part of a 24 attorneys general coalition filed an amicus brief on behalf of CFPB on the case which is now before the Supreme Court.
Bonta noted, “The stakes for consumers, for the states, and for regulation of financial markets are enormous: if allowed to stand, the Fifth Circuit’s decision threatens to upend over a decade of enforcement and regulatory work by the CFPB. That would wreak havoc for consumers across the country.”
The appeals court rejected two other arguments brought by Community Financial Services Association of America, but CFPB’s funding structure did not hold up in the Fifth Circuit.
“But one arrow has found its target: 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, render judgment in favor of the Plaintiffs, and vacate the Bureau’s 2017 Payday Lending Rule.” the court said.
The amicus brief filed by the attorneys general, argue that the CFPB’s independent funding structure does not violate the appropriations clause, but even if it did, the court should not invalidate the CFPB’s past and ongoing enforcement actions as a consequence of the violation. To do so would conflict with past precedent set by the court and could create chaos.
The appeals court decision threatens regulatory and enforcement actions protecting consumers which govern all aspects of consumer financial markets, the brief contends.
“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.,” the amicus brief stated. “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 consumer- protection laws in the financial domain. “
The payday lending industry challenged the regulation through Community Financial Services Association of America. The regulation required certain disclosures to consumers before payday lenders could attempt to make direct withdrawals from borrowers’ accounts and prohibited repeated withdrawal attempts after two consecutive rejections for insufficient funds.
The amicus brief was filed by attorneys general for New York, Arizona, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Washington, Wisconsin, and the District of Columbia.
