As discussed here, on October 19, the Fifth Circuit Court of Appeals in Community Financial Services Association of America Ltd. (CFSA) v. Consumer Financial Protection Bureau (CFPB) held that the CFPB’s funding mechanism violates the appropriations clause because the CFPB does not receive its funding from annual congressional appropriations like most executive agencies, but instead, receives funding directly from the Federal Reserve based on a request by the CFPB’s director. In response, on November 15, as discussed here, the CFPB filed a petition for a writ of certiorari to the U.S. Supreme Court, requesting not only that the Court hear the case, but also that it be decided on an expedited basis during the Court’s current term. On December 15, two groups of state attorneys general, with diametrically opposed positions, filed separate amicus briefs, urging the Court to grant the CFPB’s petition and intervene to stave off the “confusion and regulatory chaos” caused by the appellate court’s decision.

Democratic AGs Brief

In their brief, 22 Democratic state attorneys general argue the Fifth Circuit erred in finding the CFPB’s funding mechanism unconstitutional but primarily focus on the sweeping remedy imposed by the Fifth Circuit. “For over a decade, the CFPB has served as a valued enforcement and regulatory partner to the [s]tates, which have historically served at the forefront of efforts to protect consumers against fraudulent and abusive practices. Amici States therefore have a compelling interest in preserving the CFPB’s authority, and its past regulatory actions, no matter how this Court resolves the parties’ dispute over the CFPB’s funding mechanism.”

They argue that the remedy ordered by the appellate court would cause irreparable harm to the states’ efforts to combat consumer fraud and abuse. Whereas, according to the Democratic attorneys general, the payday lending respondents do not claim the CFPB’s specific funding source has directly harmed them. “The mismatch between the harms identified by the court of appeals and the remedial order highlights the impropriety of the ruling. This case is not one where a court found that an agency had acted in derogation of Congress’s direction or in a manner inconsistent with express funding limitations … . Vacatur of the rule was not needed to respect the separation of powers between Congress and the Executive: the executive agency was acting entirely as Congress commanded. It was the court of appeals that stepped in to create a conflict between the branches that did not otherwise exist.”

The Democratic attorneys general conclude by asking the court to grant certiorari and confirm that an action cannot be voided simply because there was no valid appropriation.

Republican AG Brief

In their brief, 15 Republican state attorneys general attack the CFPB and its past actions, referring to the CFPB as a “failed experiment in administrative governance.” While the Republican attorneys general agree with the CFPB’s position that the country needs a fast answer to a question of this importance, they request that the Supreme Court affirm the Fifth Circuit’s decision.

“The [a]ppropriations [c]lause serves an important purpose: it allows Congress to supervise and control federal administrative agencies. Through Congress, [s]tates participate in that process, too. But when an agency like the CFPB operates outside the ordinary appropriations process, [s]tates have no opportunity to advise and influence. And unfortunately, real-world facts have shown that — freed from fear that its budget could be in danger — the CFPB has been willing to ignore Congress and the [s]tates. It evades effective oversight. Affirming the decision is therefore critical to bringing accountability and transparency to the CFPB’s work.” The Republican attorneys general further agree that the Fifth Circuit’s remedy was appropriate.

Going Forward

On November 22, the Supreme Court granted the unopposed request of CFSA for an extension until January 13, 2023 to file its brief in opposition to the CFPB’s certiorari petition. One of the reasons for the requested extension was to allow CFSA to also file a cross-petition for certiorari that same day, asking the Supreme Court to review the Fifth Circuit’s dismissal of its other challenges to the payday loan rule. The CFPB indicated it would respond to CFSA’s cross-petition on January 25 to facilitate the Supreme Court’s ability to consider both petitions at the February 17 conference.


Troutman Pepper State Attorneys General Team

Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
Clay Friedman – Co-leader
Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
Stephen Piepgrass
Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
Michael Yaghi
Michael handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
Avi Schick
A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
Ketan Bhirud
As a former government official at the state and federal level, Ketan leverages extensive experience in the public and private sectors to skillfully represent client interests.
Natalia Jacobo
Natalia is an associate in the firm’s business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
Namrata Kang
Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
Susan Nikdel
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
Whitney Shephard
Whitney is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey Smith
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement practice. His experience includes serving as a summer associate at the firm in 2021.
Daniel Waltz
An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
Stephanie Kozol
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.

Troutman Pepper Consumer Financial Services Team

Stefanie Jackman
Stefanie takes a holistic approach to working with clients both through compliance counseling and assessment relating to consumer products and services, as well as serving as a zealous advocate in government inquiries, investigations, and consumer litigation.
Chris Carlson
Chris represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Caleb Rosenberg
Caleb is an associate in the firm’s Consumer Financial Services Practice Group. He focuses his practice on helping federal and state-chartered banks, fintech companies, finance companies, and licensed lenders navigate regulatory risks posed by state and federal laws aimed at protecting consumers and small businesses in the credit and alternative finance products industry.