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1 1 (March 9, 2023)

handle is hein.crs/govekvh0001 and id is 1 raw text is: Congressional_______ Research S rvi e Fifth Circuit: CFPB's Funding Authority is Unconstitutional Updated March 9, 2023 In 2010, Congress established the Consumer Financial Protection Bureau (the CFPB or Bureau) as an independent bureau within the Federal Reserve System. As with other financial regulators, Congress gave the CFPB more independence from political control than a typical Cabinet department. One director, serving a five-year term, would oversee the Bureau's rulemaking, enforcement, and adjudication functions for federal consumer financial laws. The director would not hold this position at the pleasure of the President, but instead could be removed only for inefficiency, neglect of duty, or malfeasance in office. The director also would not depend on annual appropriations. Funding would come mostly from the combined earnings of the Federal Reserve. A decade after the CFPB's creation, though, the Supreme Court in Seila Law LLC v. Consumer Financial Protection Bureau held that the Bureau's structure violated the constitutional separation of powers. The Court explained that the for-cause removal provision was enough to render the agency's structure unconstitutional. The Court added that the Bureau's permanent funding source further aggravated the President's inability to control the director because the President could not influence the director by recommending or vetoing annual appropriations bills. However, the Court did not hold that the funding authority, itself, was unconstitutional. Severing the removal provision from the statute was enough to cure the constitutional defect because the President could now remove the director at will. While the Bureau's funding authority occupied the background in Seila Law, it fills the foreground in a recent decision of the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit), Community Financial Services Association of America v. Consumer Financial Protection Bureau. On October 19, 2022, the Fifth Circuit held that the CFPB's funding authority violated the Constitution's Appropriations Clause and the separation of powers. On February 27, 2023, the Supreme Court granted the government's petition to review the Fifth Circuit's decision. The Fifth Circuit's decision is significant as the first appellate decision-and perhaps the first court decision ever-to conclude that congressional action, as opposed to executive or judicial action, can violate the Appropriations Clause. This Sidebar examines the Fifth Circuit's decision and its potential implications for the Bureau's continued operations. Congressional Research Service https://crsreports.congress.gov LSB10891 CRS Legal Sidebar Prepared for Members and Committees of Congress

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