Supreme Court upholds CFPB’s funding




Supreme Court upholds CFPB’s funding | Insurance Business America















Decision overturns a lower-court ruling that the consumer watchdog’s funding model was unconstitutional


Insurance News

By
Ryan Smith

The Supreme Court has rejected a challenge to the funding mechanism of the Consumer Financial Protection Bureau.

The decision, handed down Thursday, reversed a ruling by the conservative US Court of Appeals for the 5th Circuit.

The CFPB is funded based on profits from the Federal Reserve, rather than by congressional appropriation – a strategy intended to preserve the watchdog’s independence, The Post reported.

The CFPB’s budget cannot exceed 12% of the Federal Reserve’s annual operating expenses. The watchdog agency has so far not requested all of the budget authorized to it in any given year, the Post reported.

However, the appeals court said the CFPB’s funding mechanism violated a constitutional mandate for congressional appropriation of money, the Post reported.

During arguments before the Supreme Court, the Biden administration maintained that while the Constitution gave Congress the authority for appropriations, it set few limits on how appropriations could be made.

The administration argued that upholding the 5th Circuit’s decision could impact the funding for other regulatory agencies, including the Federal Reserve Board, and could even result in problems for Social Security and payments on the national debt, the Post reported.

Justice Clarence Thomas authored the 7-2 decision overturning the appeals court’s ruling. Justices Neil M. Gorsuch and Samuel A. Alito Jr. dissented, saying the decision would allow the CFPB to spend practically unlimited money without congressional oversight.

“There is apparently nothing wrong with a law that empowers the Executive to draw as much money as it wants from any identified source for any permissible reason until the end of time,” Gorsuch wrote in his dissent.

The CFPB says that it has recovered more than $20 billion for consumers since it was created in the wake of the 2008 financial meltdown.

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