Former Democratic Economic Policy Officials Ask Congress to Preserve CFPB Funding
They warn Supreme Court CFPB funding decision could affect other financial regulators
Thirty-two economic policy officials from the past two Democratic administrations are warning congressional leaders that an upcoming Supreme Court ruling on the Consumer Financial Protection Bureau’s funding mechanism could upend the entire financial regulatory system.
“The same legal arguments challenging the CFPB’s funding structure—that authorizing funding in a statute other than an annual appropriations bill is unconstitutional—could imperil the funding structure of the Federal Reserve Board and other federal regulators with similar funding mechanisms,” the group wrote.
The Supreme Court is expected to rule within the next two months on whether the agency’s funding mechanism violates the Constitution. The Community Financial Services Association of America is challenging the funding mechanism as part of their lawsuit of the agency’s payday lending rule.
The CFPB is funded by the Federal Reserve and not through the annual appropriations process. The National Credit Union Administration and other financial regulators also are not funded by appropriations; they are funded by fees paid by financial institutions.
“This type of funding is a vital part of the nation’s financial regulatory system, providing stability and continuity for the agencies and the system as a whole,” the group, which includes former White House and agency economic officials, wrote in their letter.
The group also touted the benefits of the CFPB’s work.
‘The CFPB’s work has become an integral component of our financial regulatory architecture and is critical to ensuring the overall stability of our economy,” they wrote. “The agency has been essential to safeguarding the financial well-being of millions of Americans. It has promoted financial fairness, increased transparency for consumers, and held financial institutions accountable.”
The former officials also urged Congress to reject efforts by Republicans who favor changing the agency’s structure and funding. They noted that in its FY24 Financial Services spending measure, Republicans included provisions that would place the CFPB under the appropriations process and convert it to a five-member commission. That plan was rejected in the final appropriations measure. However, they said that House Republicans are pushing the same plan in separate legislation, H.R. 2798.
“These bills would undermine the independence of the CFPB and impair its ability to effectively operate on behalf of American consumers and responsible businesses,” they added.