Supreme Court Justices Appear Skeptical of CFPB Challenge

Credit union trade groups support overturning CFPB funding scheme.

David Baumann


Oct 4



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David Baumann

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David Baumann

A squiggly pink arrow pointing downward and to the right.
CFPB logo on an office door.

In a hint that the CFPB may survive its challenge before the U.S. Supreme Court, several justices on Tuesday appeared skeptical of arguments that the agency’s funding mechanism is unconstitutional.

“You're just flying in the face of 250 years of history,” liberal Supreme Court Justice Elena Kagan, told Noel Fransisco, an attorney representing an association of payday lenders that is challenging the constitutionality of the way the agency is funded.

She said that many other agencies are funded outside the appropriations process.

Even conservative Justice Amy Coney Barrett expressed confusion about the standard that Francisco was using to argue that the funding mechanism is unconstitutional.

“We’re all struggling to figure out what the standard is that you would use,” Barrett said.

Other justices agree.

“I'm sorry,” said Justice Sonia Sotomayor. I'm trying to understand your argument, and I'm at a total loss.”

And Justice Ketanji Brown Jackson questioned whether the court should get involved in such a case.

“I'm a little worried, I think, about the separation of powers problem that may occur if the judiciary gets involved with telling Congress when and under what circumstances it can exercise its own prerogatives concerning funding,” she said.

Background of Case

Francisco is representing the Community Financial Services Association of America, which is challenging the CFPB’s payday lending rule, arguing that the rule is invalid because the agency is not funded through the appropriations process. The Fifth Circuit Court of Appeals agreed with the association, saying that federal agencies must be funded through appropriations.

The CFPB is challenging that ruling and oral arguments on the case were held Tuesday. Credit union and other financial services trade groups have supported the CFSA’s case. NAFCU and CUNA have said that the CFPB should be converted into a commission that is funded through the appropriations process.

Biden Administration Argument

“This Court should uphold the CFPB's funding statute because it is firmly grounded in constitutional text and in historical practice dating back to the founding,” Solicitor General Elizabeth Prelogar said, in her argument before the court.

She added, “Since the founding, Congress has consistently funded agencies through standing appropriations that are not time-limited and that provide significant discretion over how much to spend.”

And she said that the manner in which the CFPB is funded is the “default when funding financial regulators,” including the NCUA.

CFSA’s Argument

Francisco disagreed.

He said that the Biden Administration agrees that Congress cannot just authorize the Executive Branch to spend whatever it wants.

“But that's effectively what Congress did here, where it authorized the CFPB to spend whatever it deems reasonably necessary in perpetuity, subject only to a cap so high it's almost never relevant, all for the very purpose of making this the most independent agency in American history,” Francisco said.

Excessive Power

Justice Clarence Thomas agreed that the CFPB has excessive power.

“It seems that at least when I…was in the executive branch, that Congress exercised [appropriations decisions] to check the executive branch to some extent,” he said.

Chief Justice John Roberts said he is concerned that a ruling upholding the CFPB’s funding would provide the Executive Branch with too much power.

“To the extent that takes you away from the appropriations power, it significantly enhances the power of the executive,” he said.


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