consumer financial protection bureau (CFPB) filed a brief this week US Supreme Court Arguing that its funding source does not violate the Appropriations Clause of the US Constitution, despite a recent Fifth Circuit Court of Appeals decision saying otherwise.
Thank you for reading this post, don't forget to subscribe!With its brief, the CFPB is trying to overturn the Fifth Circuit’s decision. Community Financial Services Association of America Ltd. v. CFPB, Arrived at the end of last year. In that decision, the presiding panel of judges ruled that the CFPB’s design violated the Constitution because it received funding federal Reserve and not an appropriations law passed by Congress.
In its brief, the CFPB argues that the manner in which it is funded falls within the traditional readings of the text of the Constitution, which defines the “appropriation” of funds as “only a law that may be appropriated for particular uses.” provides a special source of funds for the U.S.,” and that “the Founders knew how to limit the authority of Congress to make appropriations when they wished to do so.”
In the section of the Constitution immediately preceding the Appropriations Clause, there is a provision that limits the appropriation of funds to raise the military to a period not exceeding two years.
“Under that separate clause, Alexander Hamilton explained, Congress is not ‘at liberty to vest permanent funds for the support of an army in the Executive Department’; instead, it is ‘obliged,’ ‘at least every two years’ once, to deliberate on the expediency of keeping a military force on foot,’ the brief said.
The argument is similar to the controversial Second Circuit Court of Appeals ruling in March that found the CFPB’s constitutionality valid.
,[T]The CFPB’s funding structure is not constitutionally unsound under either the Appropriations Clause or the non-representational doctrine,” the Second Circuit ruled in part.
In February, the Supreme Court agreed to hear a case challenging the constitutionality of the bureau in its next term. While the Biden administration sought to expedite the decision in its appeal, the Court will instead wait until its new term in October. However, a judgment in the matter is not expected to be handed down until early 2024 at the earliest.
This is the latest challenge to the constitutionality of the CFPB. In mid-2020, the Court held a hearing Sela Law LLC v. consumer financial protection bureauwhich asked the Court to determine whether the CFPB’s substantial executive authority violates the constitutional principle of separation of powers between the branches of the federal government.
In that case, the Supreme Court ruled that the appointed directors of the CFPB are not immune from being fired by the President of the United States, but stopped short of invalidating the agency’s structure.
It called for President Biden to appoint his own CFPB director once he enters office. A similar decision followed from the Supreme Court concerning the Federal Housing Finance Agency, which ultimately led to the resignation of the previous administration’s FHFA director and the appointment of Sandra Thompson, the current incumbent.
