The court of appeals vacated the 2017 rule on the ground that the CFPB was receiving funding through that unconstitutional funding mechanism when it adopted the rule.
And that scheme, the court of appeals concluded, violates the Constitution’s appropriations clause, which directs that “o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” The appropriations clause, the court of appeals explained, “ensures Congress’s exclusive power over the federal purse,” which is in turn essential to ensure that other branches of government don’t overstep their authority. Instead of receiving money allocated to it each year by Congress, the CFPB receives funding directly from the Federal Reserve, which collects fees from member banks. Court of Appeals for the 5th Circuit rejected most of the groups’ challenges to the rule, but it ultimately struck down the rule based on the CFPB’s unique funding scheme, which operates outside the normal congressional appropriations process. The case involving the CFPB began as a challenge by the payday-lending industry to a 2017 rule that (as relevant here) barred lenders from making additional efforts to withdraw payments from borrowers’ bank accounts after two consecutive failed attempts due to a lack of funds.Ī three-judge panel of the U.S.
The announcement came as part of a list of orders from the justices’ private conference last week. A federal appeals court ruled in October that the funding mechanism for the CFPB violates the Constitution, but the Biden administration, which had asked the justices to weigh in, says that allowing the lower court’s decision to stand could raise “grave concerns” for “the entire financial industry.”
The Supreme Court on Monday agreed to take up a major case involving funding for the Consumer Financial Protection Bureau, which was formed in response to the 2008 financial crisis.
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