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Bureau stance in lawsuit hints at broader response to appeals court ruling regarding legality of the agency’s funding.
There is absolutely nothing unique or unconstitutional about the way the CFPB is funded, the agency told a federal court this week.
In documents filed in the U.S. District Court for the Northern District of Illinois, the agency contends that the Fifth Circuit Court of Appeals was incorrect in deciding that CFPB funding is illegal since it does not go through the appropriations process.
“Although the Fifth Circuit described the Bureau’s funding as ‘novel’ and ‘unprecedented,’ the Bureau is not meaningfully different from countless other agencies and programs that are funded in ways other than annual spending bills,” the CFPB told the Illinois federal court.
Several Cases Being Questioned
The agency was responding to a request by TransUnion to dismiss a suit filed by the CFPB contending that the company had violated a 2017 consent order concerning its marketing of credit-related products.
In asking that the suit be dismissed, TransUnion cited last week’s ruling by the appeals court, which found that the agency’s payday lending rule was illegal since its funding scheme was illegal. The decision, which currently applies only in the Fifth Circuit states of Texas, Mississippi and Louisiana, is being cited by defendants in several enforcement cases filed by the agency.
The Bureau’s Broader Strategy
The CFPB has not commented on the ruling itself and the Illinois filing is the first indication of its response.
In that response, the agency said that the Federal Reserve Board, OCC, FDIC and other agencies—presumably including the NCUA, although it is not mentioned—have a long history of drawing and spending money in ways similar to the funding for the CFPB.
“Under the Fifth Circuit’s reasoning, all of these authorizations, and numerous others, might become constitutionally suspect,” the bureau stated.
The agency further contends that the appeals court “mustered no case from more than 230 years of constitutional history that has ever held that Congress violates the Appropriations Clause or separation of powers when it authorizes spending by statute, as it did for the Bureau.”
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