After Oral Argument, Justices Seem Likely to Preserve CFPB Funding

The CFPB appears well poised to rebuff a challenge to its funding structure after the Supreme Court held oral argument on the issue on October 3.  I attended the oral argument and summarized some of my observations, thoughts, and predictions here.  

At issue in the case is the manner in which the CFPB is funded.  The agency is organized under the Federal Reserve System and is not subject to Congress’s annual appropriations process.  Instead, the director requests operating funds from the Federal Reserve each year up to a statutory cap of 12% of the Fed’s overall budget.  The Federal Reserve System, in turn, is funded mainly through assessments on financial firms and certain interest income on investments; it too is not subject to regular Congressional appropriations.  

Trade associations led by the Consumer Financial Services Association (CFSA) challenged the Bureau’s payday lending rule by arguing, among other things, that the CFPB’s unique funding structure violates the constitutional provision requiring Congress to appropriate funds for executive agencies.  As the litigation moved through the federal courts, the Fifth Circuit accepted CFSA’s argument and castigated Congress for “abandoning” its responsibility under the appropriations clause by creating a funding framework that is “double-insulated” from Congress.  CFSA v. CFPB, 51 F.4th 616, 639 (5th Cir. 2022).  The Fifth Circuit went further, concluding that the constitutional defect demanded vacatur of the payday rule.  The Supreme Court granted the CFPB’s request for review.