CFPB’s Funding Mechanism is Deemed Constitutional

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By Matt Hagen, JD, CAMS, CRCM – Compliance Manager, Financial Institutions Group

On May 16, 2024, the U.S. Supreme Court issued a decision determining the funding mechanism for the Consumer Financial Protection Bureau (CFPB) is constitutional.

The CFPB’s funding is not directly appropriated by Congress, but rather drawn from money held at the Federal Reserve, based on a request by the CFPB director for funds reasonably necessary to perform the agency’s duties. This structure had been challenged as a violation of the appropriations clause which provides, in part, that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”

In Consumer Financial Protection Bureau et al. v. Community Financial Services Association of America, LTD, et al., the court ruled the CFPB’s funding structure is constitutional. In a 7-2 vote, the majority held that, “Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. The statute that provides the Bureau’s funding meets these requirements. [The Court] therefore conclude[s] that the Bureau’s funding mechanism does not violate the Appropriations Clause.” 

Today’s decision by the court will likely impact current pending cases related to CFPB rulemaking, including the recent injunctions related to the agency’s credit card late fee rule and the Small Business Lending rule. 

Need help understanding the impact of this decision on your financial institution? Doeren Mayhew’s regulatory compliance pros are here to help. 

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