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SCOTUS Will Hear Challenge to CFPB Funding Mechanism

Authored By: Lewis Wood on 2/28/2023

The Supreme Court announced Monday it will hear a lawsuit challenging the funding mechanism of the CFPB. CUNA has long supported placing the CFPB under the traditional appropriations process.

The three-judge panel found in October that placing CFPB funding outside of the process violates the U.S. Constitution’s structural separation of powers.  

Your League advocates for placing CFPB under the standard Congressional appropriations process.

The closely watched case could have a huge impact on consumers, the agency and the many industries it oversees. The CFPB had petitioned the court in November to review a decision by the U.S. Court of Appeals for the Fifth Circuit. A three-judge panel of the Fifth Circuit found that the CFPB's funding through the Federal Reserve Board — an executive agency — and not through annual congressional appropriations violates the Constitution's separation of powers doctrine. The Fifth Circuit panel had invalidated part of the CFPB's 2017 payday lending rule.

The CFPB responded to the Fifth Circuit's decision by saying: "There is nothing novel or unusual about Congress's decision to fund the CFPB outside of annual spending bills." 

Legal experts think the Supreme Court will want to know all the different ways that federal agencies are funded before determining whether the CFPB's funding is unconstitutional. Few experts think the court will abolish the CFPB outright. But the Fifth Circuit's ruling opened the door for the bureau's 12-year history of rules and enforcement actions to be challenged

While the high court considers the case, the CFPB faces challenges to its regulatory and enforcement actions. The case is the second constitutional challenge to the CFPB in five years.

Related: SCOTUS to Consider Constitutionality of CFPB Funding (NAFCU)
Related: SCOTUS Will Hear Challenge to CFPB Funding Mechanism (CUNA)

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