Such an unprecedented ruling would harm financial institutions, especially smaller entities, and consumers as well as imperil the Federal Reserve and Medicare
WASHINGTON, D.C. – The Supreme Court would roil financial markets if it adopted an unprecedented lower court ruling warn several small financial institutions in an amicus brief for Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association (CFSA). The lawsuit was originally filed by a trade group for payday lenders (CFSA) that challenged a CFPB rule, including by illogically arguing that the Bureau is unconstitutionally funded. Congress chose to appropriate funds for the CFPB outside of an annual congressional appropriations process – as Congress has done with other financial regulators, including the Federal Reserve Board, and with many other government agencies throughout U.S. history.
The brief from the small financial institutions (Amici) states, in part:
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, free from the outsized influence of any one market segment...
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.
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... 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...
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...
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...
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.
The Supreme Court agreed to hear the lawsuit after the U.S. Court of Appeals for the Fifth Circuit ruled that CFPB funding is unconstitutional – a reckless decision that flies in the face of judicial precedent, our country’s history, and text of our Constitution. The Second Circuit, the D.C. Circuit, and at least six federal district courts have affirmed the constitutionality of CFPB funding.
The amicus brief described above was submitted by the following community development financial institutions (CDFIs), credit unions, industry associations, small financial firms, and nonprofits: Accompany Capital; Asian Real Estate Association of America; BLDS; BOC Capital; Business Outreach Center Network; Center for Responsible Lending (“CRL”); Coastal Enterprises, Inc.; GreenLyne; National Association of Hispanic Real Estate Professionals; National Association for Latino Community Asset Builders (“NALCAB”); NY CDFI Coalition; Oweesta; Raza Development Fund; Self-Help Credit Union; and, Solas AI.
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