Supreme Court to hear case on legality of CFPB funding structure

The Supreme Court today announced it will hear a case challenging the Consumer Financial Protection Bureau’s funding structure on the grounds that it violates the separation of powers clause of the U.S. Constitution. Uniquely among federal agencies, the CFPB receives its funding directly from the Federal Reserve System based on a request from the bureau’s director.

A three-judge panel in the Fifth Circuit Court of Appeals ruled last year in the case of Consumer Financial Protection Bureau v. Community Financial Services Association of America that such a funding structure was unconstitutional. Specifically, the court ruled that in setting up the CFPB’s funding structure, Congress ceded direct control over the CFPB’s budget by insulating it from annual appropriation, as well as indirect control by making the agency’s source also insulated from the appropriations process.

“The separation of powers—and related accountability of executive power—is a hallmark of American democracy,” said American Bankers Association President and CEO Rob Nichols. “Today’s announcement that the Supreme Court will consider the constitutionality of the CFPB’s funding is a step toward resolving longstanding questions surrounding the bureau. We have seen the bureau repeatedly ignore legal boundaries established by Congress. To bolster the CFPB’s accountability, ABA has long advocated for a board or commission structure and for the bureau to be subject to the appropriations process. We hope that the resolution of this case will take heed of these critical issues while ensuring Americans continue to have access to the financial products they want and need, along with the protections they deserve.”