Defense and Compliance Attorneys
“CFPB tees up second funding battle with Supreme Court” refers to a new legal fight over how the Consumer Financial Protection Bureau (CFPB) is funded, despite the U.S. Supreme Court already upholding its basic funding structure in 2024.
Background: First Supreme Court case
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In May 2024, the Supreme Court decided Consumer Financial Protection Bureau v. Community Financial Services Association of America, holding 7–2 that the CFPB’s funding mechanism—drawing money from the Federal Reserve within a statutory cap—complies with the Constitution’s Appropriations Clause.
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That ruling reversed a Fifth Circuit decision that had found the structure unconstitutional and broadly confirmed that Congress may fund the CFPB through standing, non‑annual appropriations from the Fed.
What the new fight is about
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The new “second funding battle” arises because Acting CFPB Director Russell Vought has told a federal court that he cannot lawfully request new funds from the Federal Reserve, citing an Office of Legal Counsel interpretation that the Fed currently has no “combined earnings” from which to fund the Bureau after several loss‑making years.
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The CFPB’s union and critics of this move argue that “combined earnings” should be read differently and that Congress did not intend the CFPB’s funding to shut off whenever the Fed’s net income turns negative.
Why experts think it could reach the Supreme Court
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The dispute turns on statutory language in the Dodd‑Frank Act about funding the CFPB from the Fed’s “combined earnings,” which is not precisely defined in the statute and is now being interpreted in conflicting ways by the agency and its union.
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Because the Supreme Court has already ruled on the constitutionality of the overall funding scheme, many observers expect this new, narrower question—how “combined earnings” must be calculated and whether funding can be cut off—to work its way through the courts and potentially back to the Supreme Court.
What is at stake for the CFPB
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The CFPB has told a court it can operate with existing funds only until at least December 31, 2025, unless the Fed resumes sufficient earnings or the legal issue is resolved, raising the possibility of a future funding shortfall.
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If courts ultimately side with the union or other challengers and require continued funding, the Bureau’s operations and ongoing rulemakings—such as efforts on fair lending and medical debt—are more likely to continue uninterrupted; if they side with Vought’s interpretation, the CFPB could face serious operational constraints or pressure for Congress to redesign its funding model.
CFPB “funding autonomy” means the Bureau is financed outside the annual congressional appropriations process, primarily through capped transfers from the Federal Reserve System authorized by the Dodd‑Frank Act. Supporters argue this design is constitutionally sound and necessary for effective, stable consumer protection, while critics claim it undermines the Appropriations Clause and separation of powers by insulating the agency from democratic fiscal control.
Arguments supporting funding autonomy
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Proponents say the Appropriations Clause only requires that Congress identify a source of public funds and authorize their use for specified purposes, which Dodd‑Frank does by creating the CFPB fund, specifying its purposes, and imposing a statutory cap on how much the Bureau may draw each year.
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They emphasize that Congress itself chose this model, can amend or repeal it at any time, and has long used similar standing or off‑budget funding mechanisms for other financial regulators, so the CFPB is part of an accepted constitutional practice rather than a radical departure.
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Advocates also argue that insulating the Bureau from annual appropriations protects it from industry and partisan pressure, allowing more consistent enforcement of consumer‑protection laws and reducing the risk that funding threats will be used to influence ongoing investigations or rulemakings.
Arguments against funding autonomy
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Opponents contend that allowing the CFPB to set its own budget within a statutory cap and draw funds indefinitely from the Fed “self‑funds” the agency in a way that sidesteps Congress’s traditional power of the purse, violating the spirit if not the letter of the Appropriations Clause.
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They argue that combining broad regulatory and enforcement powers with effectively perpetual, non‑reviewable funding makes the CFPB unusually insulated from both Congress and the President, raising separation‑of‑powers concerns and, in critics’ view, weakening democratic accountability.
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Some critics warn that if this model is upheld and widely copied, Congress could use similar structures to create more “autonomous” agencies, gradually eroding the appropriations process as a key mechanism for checking executive‑branch agencies.
How courts have treated these arguments
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The Fifth Circuit adopted much of the critics’ reasoning, labeling the CFPB’s scheme “unique,” finding that it ceded excessive budgetary control and therefore violated both the Appropriations Clause and structural separation‑of‑powers principles.
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The U.S. Supreme Court later rejected that view, holding that the CFPB’s mechanism satisfies the Appropriations Clause because it is created and limited by statute, and concluding that historical practice and constitutional text do not support treating this funding model as inherently unconstitutional, even while a minority of Justices continued to stress the autonomy and accountability concerns.
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