Republicans file amicus in CFPB constitutionality case

Sen. Tim Scott, R-S.C., on left; Rep. Patrick McHenry, R-N.C., on the right
Senate Banking Committee ranking member Tim Scott, R-S.C., and House Financial Services Committee Chair Patrick McHenry, R-N.C., led a group of Republican lawmakers in filing an amicus brief in a case before the Supreme Court that could find the Consumer Financial Protection Bureau's funding structure unconstitutional.
Bloomberg News

A bicameral group of 132 Republican members of Congress urged the Supreme Court to rule that the Consumer Federal Protection Bureau's funding structure is unconstitutional on Tuesday.

The appeal was detailed in an amicus brief submitted on a case over whether the Bureau's funding from an executive agency, the Federal Reserve Board, is out of step with the Constitution. 

The Republican members of Congress argued that the court should side with a Fifth Circuit appeals court ruling from last year, in which the bureau's funding was found to violate the separations of power outlined in the Constitution because it does not have to be approved by Congress.

"The CFPB insists that its funding mechanisms are analogous to those used by agencies like the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the U.S. Postal Service. But that is wrong," wrote the lawmakers, led by House Financial Services Committee Chair Patrick McHenry, R-N.C., Rep. Andy Barr, R-Ky., Rep. Bill Huizenga, R-Mo., and Senate Banking Committee ranking member Tim Scott, R-S.C.

The Supreme Court agreed to take CFPB vs. Community Financial Services Association of America among the cases it will hear this term after the CFPB asked in November that it review how the three Fifth Circuit judges — all of whom were appointed by former President Donald Trump — had ruled. The Second Circuit, by contrast, backed a lower court ruling in March that sided with the CFPB.

If the Supreme Court sides with the Fifth Circuit, it could undermine the legitimacy of the CFPB's rulemaking and enforcement actions, potentially opening it to a flurry of litigation, experts have said. That outcome will hinge on how expansive the justices want to get in their ruling, however. 

The Republicans argued that the court ought to consider the CFPB as "in an entirely different league" when it comes to insulation, suggesting that it functions as a "sort of junior-variety Congress" when setting its funding without congressional oversight.

"Such insulation means that Congress itself is not determining the CFPB's funding," the lawmakers said. "The Court should affirm the judgment below, which will return the matter of the CFPB's funding to the normal political and legislative channels."

Many agencies, like the U.S Postal Service and U.S Mint, are funded from sources other than congressional appropriations. Meanwhile, the Federal Reserve receives its funding from its own monetary policy operations.

But federal banking regulators like the Office of Comptroller of the Currency and Federal Deposit Insurance Corp. receive funding through fees and assessments on financial firms. 

When the Dodd-Frank Act of 2010 established the CFPB and outlined how it would be funded, financial firms objected to the bureau being funded by fees or assessment. The CFPB has argued that there is nothing unusual about its funding pipeline through the Fed.

But the Republican members of Congress suggested that the Dodd-Frank Act set up the agency's funding in a way that was designed to isolate it from congressional appropriations.

"Dodd-Frank included a panoply of provisions designed to insulate the agency as much as possible from Congress's ordinary appropriations processes," the members of Congress wrote. "[It] also neutered the House and Senate Committees on Appropriations' oversight of the CFPB by purporting to deprive them of the ability to review the CFPB's funding."

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