Today, the Supreme Court hears oral arguments about whether the Consumer Financial Protection Bureau (CFPB) funding structure is constitutional. The case in question, “Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited,” where the Fifth Circuit concluded that the CFPB’s funding mechanism violated the Appropriations Clause of the Constitution. Because the CFPB’s funding mechanism violated the Constitution, the Fifth CIrcuit vacated the CFPB’s Payday Lending Rule.

This is a significant holding because it is probably the only court to hold that a congressional action can violate the Appropriations Clause – other decisions note that the Appropriations Clause is the domain of Congress, so certain executive or judicial action could violate it. Yet here, the Fifth Circuit put an affirmative duty on Congress to use its fiscal power and cannot legislate for other entities or mechanisms to determine funding. 

The Fifth Circuit’s action of using that reasoning to vacate a rule means all of the CFPB’s actions since its inception can be called into question.  

For more context, Dodd-Frank created the CFPB and its funding structure in 2010 after the Great Recession. The CFPB’s funding model relies on an annual capped allocation from the earnings of the Federal Reserve System, enabling the agency to execute its responsibilities in regulating and enforcing consumer financial protection laws without worrying about shifts in politics. 

There were several “friend-of-the-court” briefs filed in favor of the CFPB’s structure and several friend-of-the-court brief filed against the CFPB (these are called Amicus briefs, because lawyers love Latin and “amicus curiae” means friend of the court in Latin).

On the pro CFPB side, 140 current and former lawmakers noted that “Congress’s long-exercised authority to structure appropriations as it sees fit to solve a wide array of national problems is as crucial now as it was at the Founding ….The history underpinning the establishment of the Consumer Financial Protection Bureau (CFPB) well illustrates Congress’s authority to craft appropriations that are tailored to the problem at hand.”

On the anti CFPB side, a group of 132 lawmakers argued Dodd-Frank was designed to transfer congressional oversight to an executive agency, “Dodd-Frank worked a stunning role reversal, with the CFPB dictating its own level of funding each year, while Congress remained largely out of the picture,” they told the court. “The CFPB certainly believes itself to be in the driver’s seat.”