More than three dozen state attorneys general, including California’s, have joined in a pair of amicus briefs urging the U.S. Supreme Court to review how the Consumer Financial Protection Bureau is funded.
“The lower court has effectively declared the Consumer Financial Protection Bureau, and the regulatory actions it has taken, to be unconstitutional, because the court concluded that the CFPB is funded in an unconstitutional manner,” said Jonathan H. Adler, the Johan Verheij Memorial Professor of Law and Director, Coleman P. Burke Center for Environmental Law, at Case Western Reserve University School of Law, in an email response to questions from the Northern California Record.
He said the Biden Administration is asking the high court to undo that decision "because it is trying to preserve the CFPB's regulatory authority.”
Adler
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The Fifth Circuit’s ruling in Community Financial Services Association of America v. CFPB preceded the petition for review from the nation’s highest court.
Adler noted that the primary question is whether it is constitutional for a regulatory agency to be funded outside of the normal appropriations process and to effectively control the scope of its own budget.
“The concern is that this type of funding structure prevents the CFPB from being politically accountable because it is not dependent upon appropriations for its funding,” Adler said.
Two amicus briefs were filed on behalf of states, one on behalf of conservative red states and the other on behalf of progressive blue states, he added.
“Interestingly enough, they both support certiorari in this case (though for different reasons). There was already a strong likelihood the Court would take this case because a federal law had been struck down,” Adler said. “That both red and blue states are calling for the Court to hear the case only increases that likelihood.”
The Supreme Court will issue its formal decision on whether to grant review in the coming weeks.
“This case will determine whether the CFPB, as currently structured, may impose regulations relating to consumer finance and consumer protection,” Adler said. “If the Court upholds the Fifth Circuit's decision, it will be incumbent on Congress to enact a new funding mechanism for the agency.”
The CFPB was formed in 2011 under a federal law enacted under former President Barack Obama.