Oral Arguments Take Place in the CFPB Case Before the Supreme Court

Last week, the Consumer Financial Protection Bureau (CFPB) presented its case before the U.S. Supreme Court in CFPB v. Community Financial Services Association of America.

The case centers on the constitutionality of the CFPB’s funding structure, which is double insulated from congressional oversight due to its statutorily defined funding mechanism. Instead of being funded through regular appropriations, the CFPB is funded through the Federal Reserve, which also receives its funding outside of congressional appropriations. The funding was ruled unconstitutional by the Fifth Circuit last year, bringing into question any rulemaking authority coming from the CFPB and its ability to exist as statutorily prescribed.

U.S. Solicitor General Elizabeth Prelogar defended the CFPB, arguing that a decision against the Bureau could impact other agencies funded outside of standard appropriations. But when Justice Samuel Alito pressed her to provide an example of an agency funded in a similar manner as the CFPB, she only mentioned the U.S. Customs Service. Alito continued to push the question, asking for an additional example of an agency funded outside appropriations via another agency funded outside of appropriations. Prelogar failed to provide such an example, harming one of the CFPB’s central arguments.

However, while the court did not signal a clear direction for their decision, statements from some of the justices point to a possible victory for the CFPB. Justices Brett Kavanaugh and Amy Coney Barrett’s lines of questioning showed some skepticism toward the Fifth Circuit’s decision. Barrett questioned Noel Francisco, a lawyer representing the industry groups, during hearings on his overarching premise surrounding the case. Much of his argument centered on the assertion that CFPB funding is “perpetual” and set by the CFPB director himself, which Francisco argued is unconstitutional and gives the executive branch too much power. Many justices disagreed with this assessment, noting that Congress has long had broad powers when it comes to funding, including standing appropriations.

Notably, no questions were asked by eight of the nine justices in regards to how to remedy the funding issue. This indicates they may not believe any type of remedy is necessary. Further, Justice Kavanaugh noted that the funding structure could be changed by Congress “tomorrow,” indicating that he is at odds with Francisco’s argument that the CFPB’s funding structure is perpetual.

While the funding structure of the CFPB is unique, the case made before the Supreme Court did not appear sufficient to seriously change how the agency currently operates. The decision—likely on the side of the CFPB—will come down sometime next year, overruling the Fifth Circuit.