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Under the law, the bureau receives funding from the Federal Reserve. This structure has been described as different from other federal agencies, which typically receive funding through congressional appropriations processes, a CBS News report said. In fiscal year 2022, the CFPB received around $641.5 million in funding from the Fed, below the inflation-adjusted cap of about $734 million, according to court filings.
A legal challenge was brought by small-dollar lenders challenging a 2017 payday CFPB rule, which resulted in restricting their activity. The groups argued the bureau’s ruling is invalid as the regulator’s funding mechanism violates the Constitution.
A federal district court ruled in favor of the CFPB. However, the US Court of Appeals for the Fifth Circuit overturned the ruling of the lower court and invalidated provisions of the payday lending rule as “the product of the bureau’s unconstitutional funding structure,” according to the CBS News report.
The Biden administration appealed the Fifth Circuit’s ruling and asked the justices to consider whether the appellate court erred when it found the funding mechanism of the CFPB to be unconstitutional.
“Congress enacted a statute explicitly authorizing the CFPB to use a specified amount of funds from a specified source for specified purposes. The Appropriations Clause requires nothing more,” Solicitor General Elizabeth Prelogar told the court in a filing. “The court of appeals’ novel and ill-defined limits on Congress’s appropriations authority contradict the Constitution’s text and congressional practice dating to the founding.”
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