FOR IMMEDIATE RELEASE

Oct. 2, 2023

CONTACT
Carter Dougherty
carter@ourfinancialsecurity.org

Voices Multiply Calling on Supreme Court to Reject Challenge to CFPB Funding
A High Court ruling on the CFPB raises alarms about other agencies and financial stability

Washington, D.C. – A growing chorus of legal experts and policymakers are raising the alarm about the Supreme Court agreeing with the payday lending industry and concluding that the funding mechanism that Congress created for the Consumer Financial Protection Bureau is unconstitutional.

Tomorrow (Tuesday, Oct. 3), the Supreme Court will hear oral arguments in CFPB v. CFSA, in which the Community Financial Services Association of America, a lobbying group that represents the predatory payday lending industry, is trying to overturn a regulation protecting consumers against illegal bank account debits.

Americans for Financial Reform will host a press briefing with legal experts after oral arguments. A memorandum summarizing the case can be found here. 

The Court must decide whether to overturn the Fifth Circuit’s unprecedented interpretation of the Appropriations Clause that called into question the CFPB’s secured funding mechanism and suggested it should be part of annual appropriations. Other courts, including the Second Circuit, have already rejected the Fifth Circuit’s reasoning. Such a ruling would undermine 12 years of consumer protection rules and enforcement actions, the industries that the CFPB oversees, and other federal agencies and programs – notably the Federal Reserve, the FDIC, and even Social Security and Medicare – that rely on funding outside annual appropriations 

Former Republican chair of the FDIC Sheila Bair warned in an op-ed for Politico of chaos in bank regulation: “Imagine the dysfunction if the Fed’s budget could be held hostage to congressional dissatisfaction over interest rate policy, or if a member of Congress unhappy about a failed bank in his district could try to block the FDIC’s budget. Individual agency budgets could be put at risk by disgruntled politicians or lobbying interests.”

The first head of supervision at the CFPB Steven Antonakes warned in the American Banker that the agency’s already relatively small examination capacity could shrink due to volatile funding, potentially leading to a lax regulatory environment for the largest banks and nonbanks and needlessly burdening smaller institutions if the Court upholds the Fifth Circuit’s decision. 

The Fifth Circuit decision has also highlighted how Chief Justice John Roberts has lost control of the judiciary, according to Jonathan Adler, a professor at Case Western Reserve University School of Law. “There is a question about the extent to which the court has opened up some issues that may go more rapidly than it was expecting or prepared for them to go,” he told Bloomberg Law. Said University of Michigan law professor Christopher Walker: “Arguments that were off the wall 10 years ago, are now very much on the wall.” In this case, the Fifth Circuit is pursuing a fight against the “administrative state,” a term popularized by alt-right Trump guru Steve Bannon, Lawrence Hurley of NBC News pointed out.

As if to highlight the dangers facing the Fed and other agencies, a right-wing legal group, the New Civil Liberties Alliance, hinted other legal challenges would follow this one if the payday lenders succeed: “[W]hat about all the other agencies like the Federal Reserve?” a senior official with the group asked, telling CQ/RollCall they “might be subject to challenge if the CFPB funding structure is struck down.”

New polling conducted by the bipartisan duo Lake Research and Chesapeake Beach Consulting finds likely voters are overwhelmingly supportive of the CFPB’s mission across party lines (8 in 10 voters support it) and support efforts to keep the CFPB securely and independently funded. The Washington Post today outlined the work that has made the agency popular.  Numerous groups have expressed their support for the CFPB. The Military Officers Association of America highlighted how the agency acts as a “financial safeguard for servicemembers” and for military readiness as a result.

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