LeGrand Law Urges Supreme Court to Reject Constitutional Challenge to Consumer Financial Protection Bureau

On Monday, we asked the U.S. Supreme Court to reject a constitutional challenge to the mechanism funding the Consumer Financial Protection Bureau. The amicus brief, filed on behalf of two prominent financial-regulation scholars, addresses a Fifth Circuit decision holding that the CFPB’s funding mechanism violates Appropriations Clause.

As the brief explains, upholding the Fifth Circuit’s decision would stifle credit markets and likely throw the economy into recession. And its logic would invalidate the similar mechanisms funding other federal bank regulators:

[Upholding the Fifth Circuit’s decision] would expose credit markets to acute and systemic distress. The court’s logic would further require defunding all federal banking regulators, not just the CFPB. The Appropriations Clause does not compel this result, and the financial system cannot withstand it.

In addition, the brief details how the Fifth Circuit misunderstood the structure of the Federal Reserve System and hence the mechanism (assessments on Federal Reserve Banks) used to fund the CFPB:

[T]he court of appeals combined the Federal Reserve Banks and the Federal Reserve Board into a chimeric federal agency—named “the Federal Reserve”—which both owns securities and levies assessments on Federal Reserve Banks. According to the court of appeals, the “Federal Reserve” is “funded through interest earned on the securities it owns and assessments the agency levies on banks within the Federal Reserve system.” Pet. App. 34a–35a n.12. But no entity uses that name and no entity has all those characteristics. There is no “Federal Reserve”; there is only a Federal Reserve System, which includes the Federal Reserve Board and twelve regional Federal Reserve Banks. Although the Federal Reserve Board is a federal agency and levies assessments on Federal Reserve Banks, the Board owns no securities. See 2022 Board Statements 5. The securities are owned by the Federal Reserve Banks, which are not federal agencies.

The case is Consumer Financial Protection Bureau v. Community Financial Services Association of America, No. 22-448. We represent Professors Patricia McCoy (Boston College Law) and Adam Levitin (Georgetown Law).

The lead author was Greg Lipper, who has filed briefs in a diverse set of Supreme Court constitutional cases. Recent examples include an amicus brief for federalism scholars urging the Court to reject a dormant Commerce Clause challenge to a California animal-cruelty law (National Pork Producers Council v. Ross); an amicus brief for clergy and religious organizations seeking to protect public-school students from coercive, coach-led group prayers (Kennedy v. Bremerton School District); and, at his previous firm, an amicus brief for congressional scholars defending the congressional subpoenas for President Trump’s financial records (Trump v. Mazars).