WASHINGTON–In a case that has the attention of credit unions as much as any other constituency in the United States, the Supreme Court heard arguments in a case involving the CFPB, with a report in the New York times suggesting a “majority of justices…seemed ready to reject a challenge to the constitutionality” of the Bureau.
“The justices appeared unpersuaded by the argument that the way Congress had funded the Bureau had crossed a constitutional line,” the Times reported. “Instead, they signaled that they believed it was authorized by the plain words of the Constitution and had deep historical roots.”
As CUToday.info has reported, the payday lending industry is the plaintiff in the case CFPB v. Community Financial Services that challenges the constitutionality of the CFPB, as its budget is provided by the Fed and comes outside the congressional appropriations process. The case’s outcome has significant outcomes regardless of how it is decided, but a Supreme Court ruling that finds the funding mechanism to be unconstitutional would have the most far-reaching consequences, given its numerous rules and rulings.
In July, NAFCU, CUNA, and the American Association of Credit Union Leagues (AACUL) filed a joint amicus brief in support of CFSA, urging the Court to uphold the U.S. Fifth Circuit Court of Appeals ruling that the CFPB’s funding structure is unconstitutional.
Justices are Skeptical
Noel J. Francisco, a lawyer for the challengers, faced numerous questions about the implications of his position.
“We’re all struggling to figure out then what’s the standard that you would use,” Justice Amy Coney Barrett said.
Added Justice Sonia Sotomayor, “I’m trying to understand your argument, and I’m at a total loss,” while Justice Elena Kagan told Francisco that he was “just flying in the face of 250 years of history.”
For fiscal year 2022, the CFPB requested and received $641.5 million of the $734 million available.
A ‘Perpetual’ Issue
Francisco responded to the justices by saying the funding mechanism was novel and dangerous. “Congress has never authorized an agency to pick its own perpetual appropriation,” he said, “and if it can do that for the CFPB, it can do it for every other agency, too.”
But in response to that statement, Justice Brett M. Kavanaugh said, “The word ‘perpetual’ I’m having trouble with, because it implies that it’s entrenched and that a future Congress couldn’t change it. But Congress could change it tomorrow.”
The case was appealed after a unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit in New Orleans ruled last year that the bureau’s funding mechanism violated the Appropriations Clause.
Arguments on behalf of the Biden administration were made by Solicitor General Elizabeth Prelogar.