Supreme Court to Decide if CFPB Funding Violates Appropriations Clause

October 17, 2023

The Supreme Court of the United States (SCOTUS) could determine the fate of the Consumer Financial Protection Bureau (CFPB) in a recent case. This hearing centers upon the argument of whether the funding of the CFPB violates the U.S. Constitution, specifically Article 1, Section 9.

The Supreme Court justices differed in their opinions while listening to the arguments. Both sides argued the constitutionality of Congress’s decision to fund the CFPB. According to the decision, the Federal Reserve would fund the CFPB instead of using the annual appropriations process. Initially, a federal appeals court in Texas heard this case. 

Court’s Decision

This court decided that the CFPB’s funding structure violated Article 1, Section 9 of the Constitution. This article and section are better known as the appropriations clause. It prohibits the withdrawal of money from the treasury without appropriations by law. As such, the question is whether the CFPB receives funding that violates the appropriations clause. After hearing the arguments, it remains uncertain how the Supreme Court will rule this case. 

The case started in 2017 when two industry groups decided to challenge a rule that regulated payday lenders. The U.S. Court of Appeals Fifth Circuit rejected the group’s challenge to the rule’s substance. However, the judges agreed with the group’s view about whether the CFPB’s funding violated the appropriations clause.

Congress created the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. It began operating on July 21, 2011. The Bureau is an independent bureau of the Federal Reserve System.

The CFPB “implements and enforces Federal consumer financial law and ensures that markets for consumer financial products are fair, transparent, and competitive.” As such, the Bureau does have the right to take action against businesses that violate consumer financial laws. This right also includes the Fair Credit Reporting Act (FCRA). This Act covers background checks, the privacy of consumers’ information in reports, and the accuracy of the information supplied by consumer reporting agencies.

The Supreme Court’s decision may change how the CFPB receives its funding. Regardless of how that changes, the CFPB will continue monitoring employers’ compliance with the FCRA and other regulations. As such, businesses must comply with background-checking regulations, including adverse action-based decisions. One way is by partnering with a trusted background screening provider. The right partner keeps employers updated and adjusts the reports accordingly.

Keep your business compliant with new laws and regulations with JDP’s reliable background checks. Contact a sales rep today.