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Money Talks: A Challenge to Consumer Protection

Is the Consumer Financial Protection Bureau properly funded?

spinner image Consumer Financial Protection Supreme Court Photo

CFPB v. Cmty. Fin. Servs. Ass’n of America, Ltd.,

No. 22-448,

51 F. 4th 616(5th Cir. 2022),

cert. granted, 142 S. Ct. 2675 (2022).

Oral argument scheduled for Oct. 3, 2023.

Issue: Whether the Court of Appeals erred in holding that the statute providing funding to the Consumer Financial Protection Bureau, 12 U.S.C. § 5497, violates the Appropriations Clause in Article I, Section 9 of the Constitution, and in vacating a regulation promulgated at a time when the bureau was receiving such funding.

The Consumer Financial Protection Bureau (“CFPB”) was created in 2008 to ensure consumers are treated fairly by banks, lenders, and other financial institutions. To further its mission, the CFPB engages in consumer education, rulemaking, research, enforcement, and compliance.

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The CFPB has a distinct funding mechanism. Unlike other agencies that are funded through the annual appropriations process, the CFPB receives funding directly from the Federal Reserve, which in turn is funded through bank assessments. Cmty. Fin. Servs. Ass’n of Am., Ltd. v. Consumer Fin. Prot. Bureau , 51 F.4th 616, 624 (5th Cir. 2022). This funding is requested annually according to what the agency’s director finds “reasonably necessary to carry out” agency functions, with certain limitations. Id. (citing 12 U.S.C. § 5497(a)(1)).

In 2017, the CFPB promulgated a rule regulating “payday” loans, which are short-term, very high-interest loans, as well as other short-term and certain vehicle title and high-cost installment loans, to better protect consumers. 12 C.F.R. § 1041. The Community Financial Services Association of America (“CFSA”) and Consumer Service Alliance of Texas (“CSA”) (together, “Plaintiffs”) brought a lawsuit challenging the rule. Cmty., 51 F.4th at 625. The complaint alleges that the CFPB’s funding scheme violates the Appropriations Clause of the United States Constitution. Id. at 635. The Appropriations Clause requires that any money paid out of the Treasury must be “appropriated by an act of Congress.” U.S. Const. art. I, § 9, cl. 7.

In 2021, the District Court held that the bureau’s self-funding mechanism was constitutional. Cmty. Fin. Servs. Ass’n of Am., Ltd. v. Consumer Fin. Prot. Bureau, 558 F. Supp. 3d 350, 367 (W.D. Tex. 2021) On appeal, the Fifth Circuit reversed, holding that it was not enough that Congress created the CFPB’s funding scheme, because the “appropriation” was too far divorced from Congressional oversight.51 F.4th at 640.

In reaching its conclusion, the Court of Appeals considered the CFPB’s “insulation from congressional budgetary review,” its single director power structure, and the “vast rulemaking, enforcement, and adjudicatory authority” the agency holds. Id. at 638, 641–42.

The CFPB argues that the text of the Constitution, history, and precedent establish the constitutionality of the CFPB’s funding mechanism. Br. for Pet. at 14, Consumer Fin. Prot. Bureau v. Cmty. Fin. Servs. Ass’n of Am., Ltd., No. 22-448 (filed May 8, 2023). AARP and AARP Foundation filed an amicus brief supporting the constitutionality of the funding mechanism and explaining the importance of the work done by the CFPB to protect the interests and financial security of older adults in America. 

Following grant of certiorari by the Supreme Court, the Second Circuit reached the opposite conclusion from the Fifth Circuit, holding that the CFPB’s funding mechanism did not violate the Appropriations Clause. See Consumer Fin. Prot. Bureau v. Law Offs. of Crystal Moroney, P.C., 63 F.4th 174, 181 (2d Cir. 2023). The Second Circuit reasoned that the agency’s funding structure was both “authorized by Congress” and sufficiently “bound by specific statutory provision” to meet the Appropriation Clause’s requirements. Id. at 181–82. Moroney filed a petition for a writ of certiorari in the Supreme Court. The CFPB responded indicating that it agrees the petition should be held pending a decision in Community Financial Services Ass’n.  

This is not the first challenge to the constitutionality of the CFPB. In Seila Law LLC v. Consumer Financial Protection Bureau, the Court held that the agency’s single director removal protection was unconstitutional. 140 S. Ct. 2183, 2210-11 (2020). However, rather than invalidate all the agency’s actions, the Court held that the narrow provision at issue was “severable from the other statutory provisions bearing on the CFPB’s authority.” Id. at 2191-92.

Should the Court agree with the Fifth Circuit that the CFPB enacting statute violates the Appropriations Clause, the Court must then decide the fate of the regulations already promulgated by the CFPB, including whether the Payday Loan rule applies to the CFSA and CSA, among others. In that event, ideally the Court will “use a scalpel rather than a bulldozer” in curing any constitutional defects, leaving the CFPB’s regulations intact. Id. at 2210-11.


Older adults in America are all too often the targets of unfair and unlawful consumer financial practices. The price older adults pay when they fall victim to these schemes is high, either because they have less time to recover from such losses as they near retirement or because they already live on a fixed income.

The CFPB’s ability to use its regulatory, supervisory, and enforcement power to protect older adults is critical. Some of the most important regulations promulgated by the CFPB are threatened by the Fifth Circuit’s holding, including the mortgage lending and servicing rules designed to address the abuses that caused the 2008 financial crisis, which disproportionately impacted older adults. The CFPB also provides a vast array of resources to protect older adults from fraud and financial exploitation, work that is essential to combatting consumer fraud and other injurious practices.

Julie Nepveu

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