Supreme Court Justices Cast Doubt On CFPB Funding Issue

Because conservative justices are skeptical of the Consumer Financial Protection Bureau’s (CFPB) funding source, the agency will likely avoid a possible blow from the Supreme Court.

After hearing arguments from financial services companies, all liberal justices and at least three conservative majority members sounded skeptical that Congress’ decision to insulate the CFPB from the annual budget process violated the Constitution’s clause about appropriations of federal money.

Justice Brett Kavanaugh disagreed with the premise that the funding system will cut future Congresses from decision-making by saying that Congress may amend the arrangement tomorrow. Due to the case’s potential impact on the bureau’s authority and the businesses it oversees, it is receiving a lot of attention. The Biden administration and its supporters in the consumer agency have repeatedly warned that this case has the potential to destabilize financial markets and cast doubt on the roles of other banking regulators.

According to the 5th Circuit Court of Appeals, the Constitution necessitates that Congress approve budgetary funds before they can be used. The appeals court voided the CFPB’s 2017 payday lending rule because the bureau lacked the funding to craft the regulation properly. This is the first and only decision by a U.S. court to find that Congress has violated the appropriations clause of the Constitution by passing a bill.

The administration has argued that the funding procedure is lawful but has also asked the courts to divorce that clause from the remainder of the law founding the CFPB if they hold differently, rather than nullifying the CFPB’s rules and earlier actions. Prelogar argued that the regulated industry would be negatively affected by a retroactive remedy that nullified all previous CFPB measures.

Long-standing funding streams for many federal agencies, such as the Federal Reserve, different bank regulators, and the Federal Housing Finance Agency, could be disrupted by a Supreme Court judgment that Congress must allocate any cash an agency expends. Some of these initiatives would benefit from emergency legislation. Some government agencies’ ability to weather a shutdown like the one almost averted last weekend could be hampered by a sweeping verdict against the CFPB. When regular funding from Congress runs out, several government agencies and the federal judiciary rely on user fees and other comparable payments to keep their activities running.