Supreme Court to Decide Constitutionality of Consumer Financial Protection Bureau Funding

On February 27, 2023, the Supreme Court agreed to decide a major case challenging the constitutionality of the Consumer Financial Protection Bureau’s (“CFPB”) funding.

The CFPB is a federal agency created under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) in response to the 2008 financial crisis.  It is an independent bureau within the Federal Reserve System that is responsible for protecting consumers from unlawful financial services practices.

In the Court’s next term, the justices will hear a Biden administration appeal contesting a lower court decision that invalidates the CFPB’s funding scheme.  Instead of receiving money allocated to it each year by Congress, the CFPB receives funding directly from the Federal Reserve, which is itself funded through bank assessments.  The lower court concluded that, in enacting this funding scheme, Congress decided to “abdicate its appropriations power under the Constitution” and “cede its power of the purse to the [CFPB]”, thus violating the Constitution’s structural separation of powers.  Community Financial Services Association of America, Limited v. Consumer Financial Protection Bureau, 51 F. 4th 616 (5th Cir. 2022).

The case is expected to be decided in 2024.