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Consumer Financial Protection Bureau's Funding Structure Faces Supreme Court Challenge

S.J. Steinhardt
Published Date:
Oct 2, 2023


As director of the Consumer Financial Protection Bureau (CFPB), Rohit Chopra has become one of the country’s most powerful financial regulators, but that power is under threat by a case before the U.S. Supreme Court, The New York Times reported.

On Oct. 3, the high court will hear arguments in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited. At issue is whether the statute providing funding to the CFPB violates the appropriations clause in Article I, Section 9 of the Constitution. The U.S. Court of Appeals for the Fifth Circuit ruled last year that the agency’s funding structure, which uses direct transfers from the Federal Reserve, is unconstitutional, and that all actions taken by the bureau in its 12-year existence should be “rewound.”

Those actions included fining Wells Fargo $3.7 billion in fines and damages for transgressions, including wrongfully seizing some borrowers’ homes, suing MoneyGram over delays in transmitting customers’ funds, and suing TransUnion for deceptive sales tactics.

Since the Fifth Circuit ruling, more than a dozen companies, including MoneyGram, have sought to have lawsuits or penalties against them thrown out.

If the high court rules that the funding is improper, the Times reported, it could force the CFPB to rely on appropriations from Congress. Or it could uphold the Fifth Circuit's ruling and reverse all the agency's enforcement actions.

Among Chopra's detractors is Rob Nichols, the chief executive of the American Bankers Association, who called the CFPB  “a regulator gone rogue.” Richard Hunt, a former chief executive of the Consumer Bankers Association, said in a speech last year that he suspected that Chopra “hates banks. … He has a predisposed opinion of banks, and that’s just not healthy.”

But Chopra also has supporters. “Part of me wishes Rohit could run pretty much every federal agency,” David Halperin, a Washington lawyer and longtime advocate of higher-education funding reforms, told the Times. “Wherever he’s gone, he has not hesitated to find the full extent of the powers available to him, and to actually use them, which is rare.”

Chopra’s backers worry that his aggressive tactics could backfire, according to the Times. If members of Congress switched the agency’s funding stream to appropriations, that could result in reduced or eliminated funding in a Republican-controlled Congress.

“The political pendulum does not stop swinging,” Rep. Patrick McHenry (R-N.C.), chair of the House Financial Services Committee, warned Chopra at an oversight hearing. “I know you’ll wish you tried harder to play by the rules.”

In the meantime, the CFPB continues to plough ahead. It is developing rules that would prevent past-due medical debt from appearing on credit reports, the Times reported.

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