Supreme Court Petitioned to Limit Consumer Financial Protection Bureau’s Power

27-state coalition, including Virginia, challenge CFPB’s unprecedented funding mechanism as unconstitutional

Attorney General Jason Miyares of Virginia, alongside a 27-state coalition of attorneys general, is urging the U.S. Supreme Court to affirm a lower court ruling that declared the Consumer Financial Protection Bureau’s (CFPB) unique funding mechanism as unconstitutional.

At the heart of the matter lies the CFPB’s ability to amass hundreds of millions of dollars annually by simply sending a half-page letter to the Federal Reserve. The federal agency, conceived during the Obama administration, has vast jurisdiction over the U.S. financial industry. However, a ruling by the U.S. Court of Appeals for the Fifth Circuit in October deems the funding model unconstitutional, stating it circumvents Congressional appropriations and violates the Constitution’s appropriations clause and separations of powers doctrine.

The Appropriations Clause of the U.S. Constitution entrusts Congress with the “power of the purse,” a mechanism to supervise federal agencies. The Fifth Circuit ruled that the 2010 Congress erroneously forfeited this power when it provided the CFPB with an autonomous, perpetual income stream. Since then, the CFPB has defied congressional oversight, acted inappropriately before federal courts, and excluded states and other stakeholders from vital regulatory decisions.

Arguing for the preservation of power separation and protection of state interests, Attorney General Miyares emphasized the necessity of the Supreme Court to uphold the Fifth Circuit’s decision, thereby restoring Congress’s oversight role.

Should the Supreme Court affirm the Fifth Circuit’s ruling, the CFPB would need to secure an appropriation approved by Congress through standard procedures. This change would provide Congress an opportunity to restrict some of the bureau’s activities, which have escalated borrowing costs for certain consumers and excluded others from the credit market altogether.

This case is exceptional in that all 50 states have expressed their views, making it one of the few instances where the voices of all states are heard in the Supreme Court.

Virginia has aligned itself with Alabama, Alaska, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, and Wyoming in the brief.