Hill Democrats urge Supreme Court to preserve CFPB's funding structure

CFPB entrance
The Consumer Financial Protection Bureau has appealed a Fifth Circuit Court of Appeals ruling, which found that its funding structure was unconstitutional, to the Supreme Court.

Joshua Roberts/Bloomberg

In a brief filed Monday with the U.S. Supreme Court, more than 140 current and former Democratic lawmakers defended the constitutionality of the Consumer Financial Protection Bureau’s funding structure.

The legislators, who include key architects of the 2010 law that established the CFPB, urged the Supreme Court to overturn a high-stakes ruling last year by the 5th U.S. Circuit Court of Appeals. The appeals court found that the bureau’s funding, which comes from a portion of the Federal Reserve’s earnings, violates the Constitution’s separation of powers doctrine.

In their friend-of-the-court brief, the Democratic lawmakers argued that the CFPB’s funding structure aligns with how Congress wielded its appropriations powers in the early years of the United States. That kind of originalist argument has long been popular with conservative jurists.

The legislators wrote that it has been routine since 1789 for Congress to fund programs through assessments, fees and other agency revenues.

“By appropriating funds on a standing basis, rather than year by year, Congress matched the CFPB’s funding structure to the approach that it had already determined effective for other financial regulators, some going back over 150 years — but imposed more constraints on the CFPB,” the Democratic lawmakers wrote.

The brief cited four ways in which the CFPB is subject to greater constraints, or more oversight, than the Office of the Comptroller of the Currency. Like the CFPB, the OCC is not funded through the annual congressional appropriations process.

But the CFPB, unlike the OCC, is subject to an annual dollar limit on its budget, the Democratic lawmakers noted. And CFPB regulations are subject to a potential veto by the Financial Stability Oversight Council, which is not the case for OCC regulations.

“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 Democratic lawmakers wrote.

In February, the Supreme Court agreed to hear the CFPB’s appeal of the 5th Circuit’s ruling. The appeals court’s decision came in a case filed back in 2018 by a payday lending trade group, which sought to invalidate a CFPB rule that put restrictions on small-dollar consumer loans.

If the Supreme Court upholds the 5th Circuit’s ruling, the CFPB could be subjected to the annual appropriations process, which can result in fluctuating budgets depending on the partisan makeup of Congress. That would be an outcome that Democratic members of Congress have long sought to avoid.

The Democratic lawmakers who signed the court brief include Senate Majority Leader Chuck Schumer, House Minority Leader Hakeem Jeffries, Senate Banking Committee Chair Sherrod Brown and Rep. Maxine Waters, the top Democrat on the House Financial Services Committee.

Other signers included the two namesakes of the law that created the CFPB — former Sen. Christopher Dodd and former Rep. Barney Frank.


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