The Supreme Court takes up the case on the fate of the Consumer Protection Agency

WASHINGTON — The Supreme Court on Monday agreed to hear a case that could shake the Consumer Financial Protection Bureau and advance a key project of the conservative right-wing movement: curbing the power of independent agencies.

A ruling against the bureau, created under the 2010 Dodd-Frank Act in the wake of the financial crisis, could cast doubt on every regulation and enforcement action it has taken in its 12 years of existence.

The central question in Consumer Financial Protection Bureau v. Community Financial Services Association of America Case No. 22-448 is whether the manner chosen by Congress to fund the agency violated the Constitution’s appropriation clause, stating that “no money will be taken from the treasury, however, due to statutory appropriations.”

A unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit in New Orleans, ruled in October that the Bureau’s financing mechanism is in breach of this clause.

“Wherever the line may be between a constitutionally funded agency and an unconstitutionally funded agency, this unprecedented arrangement crosses it,” Richter said Cory T Wilson wrote in a statement joined by judges Don R Willett And Kurt D Engelhardt in judgment. President Donald J. Trump appointed all three judges on the panel.

The bureau is funded by the Federal Reserve System in an amount determined by the bureau so long as it does not exceed 12 percent of the system’s operating costs. In fiscal 2022, the agency requested and received $641.5 million of the $734 million available. The 2010 law said the Bureau’s funding requests “should not be subject to review by” the House and Senate Appropriations Committees

The Fifth Circuit’s decision conflicted with those of other courts. In 2018, for example, the District of Columbia Circuit said it was nothing unusual through the funding mechanism.

In calls on the Supreme Court To hear the Biden administration’s appeal, Attorney General Elizabeth B. Prelogar said the ruling “threatening to cause immense legal and practical damage to the CFPB, consumers and the nation’s financial sector.”

In 2020, the Supreme Court ruled that another part of the law establishing the agency was unconstitutional, saying that given the scope of the office’s powers, Congress could not isolate the bureau’s director from presidential oversight.

“The director has sole responsibility for administering 19 separate consumer protection statutes covering everything from credit cards and car payments to mortgages and student loans,” said Chief Justice John G. Roberts Jr. wrote for the majority.

He casually mentioned the office’s funding, noting that its budget has surpassed half a billion dollars in recent years.

“Unlike most other agencies,” the chief justice wrote, “the CFPB does not rely on the annual appropriation process. Instead, the CFPB receives funds directly from the Federal Reserve, which in turn is funded through bank valuations outside of the resource allocation process.”

Chief Justice Roberts made the same point when the case was heard. “They don’t even have to go to Congress to get their money,” he said.

In the administration’s request for review, Ms. Prelogar wrote that “the funding mechanism of the CFPB is fully consistent with the text of the Appropriations Clause, with long-standing practice, and with the precedent of this court.”

She added that excluding congressional committees from reviewing funding “simply allocates authority between different congressional bodies” and that “the appropriations clause does not address such matters of internal budgetary management of Congress.”

The case was brought by two trade groups representing payday lenders. They questioned a regulation that limits the number of times lenders can attempt to withdraw funds from borrowers’ bank accounts. The Fifth Circuit reversed the ordinance, saying it was “pulled entirely by the agency’s unconstitutional funding system.”