Carney Denies Retracting Criticism of the United States
- The Supreme Court agreed on May 16,2023,to hear arguments in Consumer Financial Protection Bureau v.
- The lawsuit stems from a challenge to the CFPB's 2017 rule regulating payday lending.
- Court of Appeals for the Fifth Circuit ruled in february 2023 that the CFPB's funding scheme was indeed unconstitutional.
Supreme court to hear Arguments on CFPB Funding in October 2023
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The Supreme Court agreed on May 16,2023,to hear arguments in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., a case challenging the constitutionality of the CFPB’s funding structure. The case will be heard in October 2023,with a decision expected by late spring 2024.
Background of the Case
The lawsuit stems from a challenge to the CFPB’s 2017 rule regulating payday lending. The Community Financial Services Association of america (CFSA), representing payday lenders, argued that the CFPB’s funding mechanism – receiving its budget directly from the Federal Reserve rather than through annual congressional appropriations – violates the Appropriations Clause of the U.S. Constitution. The CFSA contends this structure gives the CFPB undue independence from Congress and shields it from accountability.
Lower Court Rulings
The U.S. Court of Appeals for the Fifth Circuit ruled in february 2023 that the CFPB’s funding scheme was indeed unconstitutional. Specifically, the Fifth Circuit found that the CFPB’s self-funding violated the Appropriations Clause, stating that Congress retains the power of the purse. The court did not, though, invalidate the 2017 payday lending rule itself, rather pausing enforcement pending appeal. The case number in the Fifth Circuit was 22-50068.
Potential Implications
A Supreme court ruling against the CFPB’s funding structure could have significant consequences. It could require the CFPB to seek annual appropriations from Congress, potentially limiting its ability to operate independently and pursue enforcement actions against financial institutions. Some analysts predict that a negative ruling could jeopardize hundreds of CFPB rules and enforcement actions taken since its inception in 2011. conversely, a ruling upholding the CFPB’s funding would affirm its independence and authority.
CFPB response
The CFPB, led by Director Rohit Chopra, has defended its funding structure as a necessary safeguard against political interference. In a statement released after the Supreme Court agreed to hear the case, the CFPB argued that its funding model allows it to effectively protect consumers from predatory financial practices. The CFPB maintains that its independence is crucial for its mission.
Source: Supreme Court Docket