Majority of states call on Supreme Court to review constitutionality of CFPB funding

More than three dozen attorneys general from red and blue states on Wednesday asked the Supreme Court to agree to decide the constitutionality of the Consumer Financial Protection Board’s (CFPB) funding structure.

The separate coalitions of Republican and Democratic state AGs urged the court to take up the case for sharply contrasting reasons.

Led by West Virginia, a group of 16 red states want the justices to affirm a lower-court decision that said the CFPB’s funding structure usurps Congress’s power over appropriations.

“Attaching the spending power directly to Congress — including power over agencies’ budgets — makes the federal government more accountable to the States,” the Republican attorneys general said in an amicus brief.

A blue-state brief signed by Washington, D.C., New York and 20 other states backs the Biden administration’s request that the Supreme Court reverse the lower court ruling.

The CFPB, which enforces consumer financial laws, was formed by the Dodd–Frank Wall Street reform law after the 2008 financial crisis and receives its funding, which totaled around $596 million last year, from the Federal Reserve.

In October, a decision by the U.S. Court of Appeals for the 5th Circuit said the CFPB’s funding scheme violates the Constitution’s Appropriations Clause, which establishes Congress’s power of the purse.

The Biden administration’s petition for Supreme Court review said Congress’s decision to fund the CFPB through annual transfers by the Federal Reserve was a valid use of its appropriations power.

The 5th Circuit and U.S. Court of Appeals for the D.C. Circuit have issued conflicting rulings on the issue, increasing the likelihood of the Supreme Court’s review.

The case is Consumer Financial Protection Bureau v. Community Financial Services Association of America.