Supreme Court Opts to Hear CFPB Funding Case
On Monday, the Supreme Court of the United States announced its long-awaited decision to hear a landmark case in its next term, Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America, which will determine once and for all whether the CFPB’s funding mechanism is constitutional or not. Last year, the Fifth Circuit Court of Appeals determined that the independent funding mechanism Congress established to insulate the Bureau from political interference violated the Constitution’s separation of powers clause.
The case will question whether the way Congress funds the CFPB violates the Appropriations Clause of the Constitution, which states that “no money shall be drawn from the Treasury, but in consequence of appropriations made by law.”
“This marks the first time in our nation’s history that any court has held that Congress violated the Appropriations Clause by enacting a law authorizing spending,” wrote Elizabeth Prelogar, the Biden administration’s Solicitor General, according to NPR. The Biden administration noted in a brief to the Supreme Court that programs like Medicare and Social Security are paid for by mandatory spending.
The CFPB is funded by the Federal Reserve by an amount determined by the bureau. The New York Times noted that last year, the CFPB requested and received $641.5 million of the available $734 million. Other agencies like the Federal Reserve, the U.S. Postal Service, the U.S. Mint, and the Federal Deposit Insurance Corp. are also not funded through Congressional appropriations. Democrats have argued that a ruling against the CFPB could result in questioning the constitutionality of these, and potentially other, institutions.
“The CFPB’s funding structure is constitutional and the CFPB should be allowed to continue its crucial work,” said Senator Sherrod Brown (D-Ohio), Chair of the Senate Banking Committee. “A delay in hearing this case only hurts consumers, as this is an urgent issue that has horrifying implications for consumers and our entire financial system.”
Republicans have long opposed the existence of the agency on the grounds that its funding structure was unconstitutional. Patrick McHenry (R-N.C.), Chairman of the House Financial Services Committee (HFSC), said in a press release that “the CFPB’s unconstitutional funding structure improperly insulates it from Americans’ representatives in Congress.”
“The CFPB has long been an agency that lacks transparency and seeks to operate beyond its jurisdiction,” said Senator Tim Scott (R-S.C.), Ranking Member of the Senate Banking Committee. “I look forward to reviewing the Supreme Court’s decision, when the time comes, and continuing my efforts to hold the CFPB accountable to the American people and Congress.”