News release: Supreme Court arguments affirm constitutionality of CFPB’s funding mechanism

Govt. argues agency’s funding meets requirements of U.S. Constitution’s Appropriations Clause

WASHINGTON — The U.S. Supreme Court heard oral arguments Tuesday in Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA). This pivotal case will determine the future of the CFPB’s funding. 

“The arguments presented today have unequivocally affirmed the constitutionality of the CFPB’s funding mechanism. The CFPB’s funding structure fully aligns with the straightforward requirements of the Constitution’s Appropriations Clause,” said Mike Litt, U.S. PIRG’s Consumer Campaign Director.

CFSA, representing the payday lending industry, is contesting the CFPB’s payday lending regulations on the grounds that Congress authorized continuous funding for the CFPB from the Federal Reserve, instead of through annual appropriations. However, as Solicitor General Elizabeth Prelogar, appealing on behalf of the CFPB, pointed out, the Constitution’s Appropriations Clause simply requires Congress to authorize, by law, any federal expenditures and identify a funding source and purpose. 

“It is evident that Congress exercised its Constitutional authority when it created and funded the CFPB through the Dodd-Frank Act. This law set an annual cap and specified a dependable funding source, to enable the agency to fulfill its crucial role in protecting consumers,” said Litt.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which established the CFPB, authorized continuous, annually capped funding for the agency derived from the Federal Reserve System’s earnings (see SEC. 1017). Notably, the Constitution only imposes specific limitations on appropriations for raising and supporting armies, which are limited to two years. In practice, nearly two-thirds of annual federal spending does not rely on annual appropriations, and Congress retains the power to change or end its prior authorizations. Congress has also historically authorized funding from sources beyond taxation and government borrowing. Such dependable funding has enabled the CFPB to recover a remarkable $17.5 billion for consumers.

“The tireless work undertaken by the CFPB throughout its 12-year existence could hang in the balance should the Supreme Court issue an unprecedented, adverse ruling favoring payday lenders. Stripped of dependable funding, the CFPB would be hamstrung in protecting consumers. Americans nationwide cannot afford to return to a time when they were left to fend for themselves against companies with much greater resources and clout than them,” said Litt.

Mike Litt is readily available for interviews.