Today, Utah Attorney General Sean D. Reyes joined a coalition of 27 states asking the U.S. Supreme Court to uphold a lower court’s ruling that found the Consumer Financial Protection Bureau’s (CFPB) unprecedented funding mechanism unconstitutional.
The case, Consumer Financial Protection Bureau v. Community Financial Services Association of America, centers around the bureau’s funding means. Under current law, the CFPB can obtain hundreds of millions of dollars annually by sending a half-page letter to the Federal Reserve. Last October, the U.S. Court of Appeals for the Fifth Circuit ruled that this funding mechanism for the federal agency, which was formed during the Obama administration and given vast power over the U.S. financial industry, is unconstitutional.
The Appropriations Clause of the U.S. Constitution explicitly gives Congress “power over the purse” to oversee federal agencies. In October 2010, the Fifth Circuit ruled that Congress improperly gave away that power when it granted the CFPB an independent, perpetual income stream. In the 13 years since Congress made that mistake, the CFPB has resisted congressional oversight, engaged in misbehavior before federal courts, and locked states and other parties out of key regulatory decisions.
Currently, the agency gets funding from the Federal Reserve. If the Supreme Court upholds the Fifth Circuit’s ruling, the bureau would need to get an appropriation approved by Congress through normal processes. Congress would then have an opportunity to rein in some of the agency’s activities, which have increased borrowing costs for some consumers and shut others out of the credit market entirely.
The Fifth Circuit ruled that the CFPB’s bypass of Congressional appropriations violated the Constitution’s Appropriations Clause and the separation of powers doctrine.
According to the Constitution’s Appropriations Clause, “[N]o money can be paid out of the Treasury unless it has been appropriated by an act of Congress.”
The coalition’s brief further reads that, “The Appropriations Clause offers Congress one of its best tools to supervise and control federal agencies. The appropriations power is essential to the separation of powers ….”
Every state has weighed in on this case, making this a rare occasion where all 50 states are represented in the Supreme Court.
Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Virginia, and Wyoming joined the West Virginia-led brief.