The Consumer Financial Protection Bureau (CFPB) has received the date when it will defend its funding structure in front of the U.S. Supreme Court.
Arguments will be made on Oct. 3, the second day of the Supreme Court’s fall session. Justices will hear arguments as to whether Congress inappropriately delegated its appropriations authority by removing the bureau from the annual appropriations consideration and instead funding it through the Federal Reserve via budget requests.
The question involving the CFPB’s funding structure has the potential to call into question everything the bureau has done since its creation and could impact other agencies that have similar funding structures so as to insulate them from political sway.
The case stems from a lower court’s decision in the Fifth Circuit striking down the payments authorization portion of a payday lending rule promulgated by the CFPB. Consumer Financial Services of America, Ltd. challenged the rule from several angles, all of which the court dismissed except for the funding structure argument stating the bureau was unconstitutionally insulated from Congress’ “power of the purse” and therefore did not have the capability of making the rule at the time it did.
Should the Supreme Court uphold the decision, there are several theories as to how it would resolve. While some believe it may be the end of the bureau, this is unlikely, as precedence does support the severing of the problematic language from the enacting statute. Should the court elect this second option, the bureau would survive, but the provision determining how it is funded would be struck from the legislation and the funding of the bureau would revert to the standard annual appropriations procedures. It would also provide a foundation for other financial agencies with similar funding mechanisms to be challenged on the same grounds.
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