As discussed here, on October 19, 2022, the Fifth Circuit Court of Appeals in Community Financial Services Association of America, Limited (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, the CFPB filed a petition for a writ of certiorari to the U.S. Supreme Court. On February 27, 2023, the U.S. Supreme Court granted the CFPB’s petition (discussed here).

Yesterday, 99 members of the U.S. House of Representatives and 33 U.S. Senators filed an amici curiae brief urging the court to affirm the Fifth Circuit’s decision and “return the matter of the CFPB’s funding to the normal political and legislative channels, as Article I and the [a]ppropriations [c]lause require.” The amici include Chairman Patrick McHenry (R-N.C.) of the House Financial Services Committee, Representative Andy Barr (R-Ky.), the Chairman of the Subcommittee on Financial Institutions and Monetary Policy, Representative Bill Huizenga (R-Mich), Chairman of the Subcommittee on Oversight and Investigations, and Ranking Member Tim Scott (R-S.C.) of the Senate Committee on Banking, Housing, and Urban Affairs.

The main thrust of the amici’s argument is that the CFPB is unconstitutionally insulated from congressional oversight in violation of the appropriations clause and in a way unlike any other agency. Quoting a decades-old decision from then-Judge Kavanaugh, the amici emphasize that “power over the purse was one of the most important authorities allocated to Congress in the Constitution’s ‘necessary partition of power among the several departments.'” The brief then lists the following examples of how the CFPB’s funding is unique and, accordingly, unconstitutional:

  • The CFPB’s funds come from the Federal Reserve, which is itself funded outside the appropriations process. Meaning Congress lacks even indirect power to set the CFPB’s funding level.
  • The funding scheme is perpetual and even includes an automatic inflation adjustment.
  • The CFPB can carry over money year-to-year to ensure continued operations even if the Federal Reserve runs low. The CFPB purportedly had $340 million at the end of 2022.
  • The House and Senate Committees on Appropriations are barred from reviewing the CFPB’s funding levels.

While the amici admit there may be other agencies with one or two of the above features, they claim no other agency comes close to having them all.

In conclusion, the amici address the “supposed chaos in the financial world” predicted by the CFPB and its supporters if the agency’s funding were to be deemed unconstitutional and dismiss it because, according to them, Congress has already begun preparing for that possibility. “The House Committee on Financial Services has approved the CFPB Transparency and Accountability Reform Act, which would, among other reforms, authorize the CFPB to receive $650 million from unobligated amounts contained in the Consumer Financial Civil Penalty Fund for fiscal year 2024 to carry out the authorities of the CFPB, then subject the agency to the annual congressional appropriations process.”

Our Take:

There will continue to be uncertainty related to the CFPB’s status and its ability to undertake enforcement investigations and rulemaking projects until the Supreme Court takes up this case in its term beginning October 2023. A decision is not expected until late spring or early summer 2024 — likely towards the end of the term.