Supreme Court Upholds the Constitutionality of CFPB Funding

By a 7-2 vote on Thursday, the U.S. Supreme Court said that the Consumer Financial Protection Bureau (CFPB) was constitutionally-funded, and that funding of the Bureau is in compliance with the Constitution’s Appropriations Clause.

The Supreme Court’s ruling reverses a prior decision by the U.S. Court of Appeals for the 5th Circuit ruled that the CPFB’s funding violates the Constitution and should be subject to Congressional appropriations.

The case, Consumer Financial Protection Bureau v. Community Financial Services Association of America, tested the Appropriations Clause of the U.S. Constitution that reads: “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.”

“The Bureau’s funding statute satisfies the requirements of the Appropriations Clause,” said Clarence Thomas, Associate Justice for the U.S. Supreme Court in an opinion for the court. “The statute authorizes the Bureau to draw public funds from a particular source—’the combined earnings of the Federal Reserve System’—in an amount not exceeding an inflation-adjusted cap.”

The Appropriations Clause of the U.S. Constitution establishes a rule of law to govern money contained in the U.S. Treasury, where public revenue is deposited and kept and from which payments are made to cover public expenses. As the Supreme Court has explained, that rule of law directs that no money can be paid out of the Treasury unless it has been appropriated by an act of Congress.

The initial dispute with the CFPB began with a 2017 case involving the Law Offices of Cristal Moroney PC, a New York-based debt collection law firm, who attempted to get around a civil subpoena issued against them by the CFPB. Previously, a lower court ruled in the CFPB’s favor in August 2020.

“For years, lawbreaking companies and Wall Street lobbyists have been scheming to defund essential consumer protection enforcement,” said the CFPB in a release. “The Supreme Court has rejected their radical theory that would have devastated the American financial markets. The Court repudiated the arguments of the payday loan lobby and made it clear that the CFPB is here to stay. Congress created the CFPB to be the primary federal watchdog protecting consumers from predatory and abusive practices in the financial sector. Since the CFPB opened its doors in 2011, it has delivered more than $20 billion in consumer relief to hundreds of millions of consumers and has handled more than four million consumer complaints.”

Created in the wake of the global financial crisis as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB was designed by current U.S. Sen. Elizabeth Warren, then a professor at Harvard Law School.

“The U.S. consumer financial industry can sleep soundly tonight,” said Jay Beitel, Principal, Polunsky Beitel Green. “Instead of upending 24 years of consumer financing regulations, enactments, and enforcements, today in the case of Consumer Financial Protection Bureau vs. Community Financial Services Association, LTD., the U.S. Supreme Court held that the statutory funding scheme for the Consumer Financial Protection Bureau meets the constitutional mandate under the appropriations clause. So, the business of consumer financing can continue to function with the systems and procedures in place.”

Despite the CFPB’s efforts to protect consumers from unscrupulous practices by banks and financial institutions, the Bureau has been subjected to scrutiny since its establishment, including a 2020 ruling by the Supreme Court that its leadership structure was unconstitutional in the case of Seila Law v. Consumer Financial Protection Bureau (CFPB).

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Eric C. Peck

Eric C. Peck has 25-plus years’ experience covering the mortgage industry, most recently serving as Editor-in-Chief for National Mortgage Professional Magazine. He graduated from the New York Institute of Technology, where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books, and has served as Copy Editor for
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