51 F.4th 616
5th Cir.2022Background:
- Congress created the Consumer Financial Protection Bureau (CFPB) in 2010 as an independent agency led by a single Director and given broad rulemaking, enforcement, and adjudicatory powers over consumer-finance markets.
- The CFPB is funded outside the annual appropriations process: the Director requests funds from the Federal Reserve up to a statutory cap, deposits them in a Bureau fund at a Reserve Bank, and those funds are permanently available without further congressional appropriation or appropriations-committee review.
- In November 2017 the CFPB issued the Payday Lending Rule; its Payment Provisions prohibited lender-initiated withdrawals after two consecutive failed attempts absent new consumer authorization.
- Plaintiffs (payday lenders and trade associations) sued under the APA, arguing the Payment Provisions exceeded statutory authority, were arbitrary and capricious, and that the CFPB’s structure (for-cause removal, delegation, and self-funding) violated separation-of-powers principles.
- The district court granted summary judgment to the CFPB; on appeal the Fifth Circuit affirmed as to APA, removal, and nondelegation challenges but held the CFPB’s funding scheme violated the Appropriations Clause, reversed on that issue, and vacated the Payday Lending Rule.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| APA / statutory authority: whether Payment Provisions lawfully regulate repeated withdrawal attempts | Provisions exceed §5531 definitions of unfair/abusive and are arbitrary and capricious | Rule rests on a reasoned record showing substantial, not- reasonably-avoidable consumer harm | Held: CFPB acted within statutory authority; Payment Provisions not arbitrary and capricious |
| Director removal protection: whether unconstitutional insulation voids the rule | For-cause removal made Director’s actions invalid ab initio | Seila Law/Collins limit remedy; plaintiff must show harm from removal protection | Held: removal protection unconstitutional but plaintiffs failed to show it caused harm, so Payment Provisions stand on this ground |
| Nondelegation: whether delegation to CFPB lacks an intelligible principle | Delegation to regulate “unfair, deceptive, or abusive” acts is too vague | Statute includes purposes, objectives, and statutory definitions providing guidance | Held: delegation satisfied intelligible-principle standard; nondelegation challenge fails |
| Appropriations Clause / funding: whether CFPB’s self-directed, double-insulated funding violates Congress’s power of the purse | Congress unlawfully ceded appropriations power by exempting CFPB funding from appropriations and committee review | Funding enacted by Congress and comparable to other self-funded financial agencies | Held: CFPB funding violates Appropriations Clause and separation of powers; payday rule vacated as promulgated with unconstitutional funds |
Key Cases Cited
- Seila Law LLC v. CFPB, [citation="140 S. Ct. 2183"] (holding CFPB Director’s for-cause removal protection unconstitutional)
- Collins v. Yellen, [citation="141 S. Ct. 1761"] (remedial framework: challenger must show removal- protection inflicted harm)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., [citation="463 U.S. 29"] (arbitrary-and-capricious review standard)
- Gundy v. United States, [citation="139 S. Ct. 2116"] (nondelegation / intelligible-principle discussion)
- Whitman v. American Trucking Ass'ns, [citation="531 U.S. 457"] (upholding broad delegations where guided by an intelligible principle)
- OPM v. Richmond, [citation="496 U.S. 414"] (Appropriations Clause preserves congressional control over disbursements)
- Lucia v. SEC, [citation="138 S. Ct. 2044"] (remedies for actions by unlawfully appointed officers)
- NLRB v. Noel Canning, [citation="573 U.S. 513"] (separation-of-powers and remedies for unconstitutional executive action)