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The CFPB Saga Continues


The Supreme Court could decide as early as Friday whether to hear a case on the CFPB’s constitutionality.

On Monday, the “inside the Beltway” policy and politics newsletter Punchbowl reported House Republicans plan to reintroduce legislation, the Taking Account of Bureaucrats’ Spending (TABS) Act, in the coming weeks. This legislation seeks to “overhaul the structure and funding” of the Consumer Financial Protection Bureau (CFPB). Rep. Andy Barr (R-Ky.), a member of the House Financial Services Committee, and chair of that panel’s Subcommittee on Financial Institutions and Monetary Policy, is expected to sponsor the TABS Act.


Rep. Barr has taken lead on this legislation before and this year’s iteration of the bill is not expected to be remarkably different from similar legislation the GOP has previously championed. The TABS Act would put Congress in charge of setting appropriations for the CFPB (currently the CFPB gets its funding from the Federal Reserve) and it would change the CFPB’s name to the Consumer Financial Empowerment Agency.


Like in past legislative sessions, the TABS Act is not likely to become law. Yes, the Republican-held House may consider and approve the bill, but the Senate, which is in Democrats’ hands, will not touch it. And President Joe Biden certainly would not sign it into law even if the Senate were to approve the legislation.


But Rep. Barr’s CFPB bill is not the only headache the CFPB faces. As Punchbowl reminded readers, last October the U.S. 5th Circuit Court of Appeals issued a ruling that determined the “CFPB’s funding structure was unconstitutional, leaving the agency with an existential threat to its authority.” That case is likely to end up in front of the Supreme Court in the coming months, and if the nine justices rule against the CFPB, it may provide the perfect path for the TABS Act to move forward.


Before we talk more about this case, when it might be heard, and its potential implications, let’s take a look at why GOP lawmakers are so opposed to the CFPB as it’s currently structured.


The GOP Arguments Against the CFPB

The CFPB, a product of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act and the brainchild of Sen. Elizabeth Warren (D-Mass.), is a favorite punching bag for Republican lawmakers and their allies.


Since the idea for the agency was conceived, GOP policymakers have argued the CFPB wields too much power and is too far removed from congressional oversight.


In a speech on the House floor back in 2014, then-Rep. Ron DeSantis (who is now governor of the state of Florida and is a potential GOP candidate for the White House in 2024) cited The Federalist Papers and American founders’ use of checks and balances to rein in government power. “As I look at this agency, which lacks all the traditional measures for constitutional accountability … I am wowed by the amount of power that’s been invested in it.” Then-Rep. DeSantis said the director of the CFPB essentially acted as the “financial czar” for the United States and had little accountability to the president. (Dodd-Frank made clear that the CFPB director cannot be fired by the president, a provision of the law the Supreme Court struck down in 2020.) He also noted Congress had “no budget oversight” over the CFPB even though founder (and Federalist Papers co-author) James Madison argued the power of the purse was “the most effectual” check on executive branch agencies’ power.


Then-Rep. DeSantis also argued the CFPB routinely had exceeded its rulemaking authority. He even introduced an amendment to strip the bureau of the power to create new regulations while he was in Congress.


Republicans have continued to criticize CFPB rulemakings. Last year, Senate Banking Committee Ranking Member Pat Toomey (R-Penn.), who has since retired from Congress, said, “The CFPB is more out of control than ever before. It’s once again pursuing a subversive far-left agenda by abusing — and exceeding — its authorities. … It is past time for Congress to bring accountability to the CFPB by making it subject to the appropriations process and enacting other needed reforms. The current Congress won’t do that. The next one should.”


This January, shortly after taking the majority, House Financial Services Committee Republicans sent a letter to CFPB Director Rohit Chopra asking the bureau to withdraw its “pre” rule on overdraft fees that was in its Fall 2022 Rulemaking Agenda and several committee Republicans also recently sent Director Chopra a letter regarding what they say is lack of transparency in the director’s public calendar and noting the director’s unwillingness to meet with the committee. (These are just two of many letters Republican lawmakers have sent CFPB officials in recent weeks and months.)


And then there is this: last October, TABS Act author Rep. Barr called the CFPB “the most unaccountable and authoritarian bureaucratic agency in the entire federal government.”


The 5th Circuit, the Supreme Court, and the CFPB

Rep. Barr’s comment last fall came after a three-judge panel from the 5th U.S. Circuit Court of Appeals determined the way the CFPB is funded is unconstitutional. Right now, the ruling by the 5th Circuit’s panel is in effect. That means the current funding structure for the CFPB has been deemed unlawful in the states where the 5th Circuit has jurisdiction, creating uncertainty regarding the agency’s authority to promulgate and enforce regulations in those states.


The CFPB wants the Supreme Court to overturn this ruling. As legal experts at Buckley LLP noted, lawyers from the CFPB said the “assertion that the agency’s funding was ‘unprecedented’” is incorrect. In fact, they argued the CFPB’s opponents “cannot meaningfully distinguish the CFPB’s funding from Congress’s longstanding and concededly valid practice of funding agencies from standing sources outside annual spending bills.”


The Supreme Court could decide as early as this Friday whether or not to consider the case. (The nine justices meet at regular periods to vote on which cases it will consider and those that it will take a pass on.)


As Punchbowl reminded readers, the Supreme Court is led by a “conservative majority” that “has consistently ruled against the independence of federal regulators.” Punchbowl also noted “few court watchers expect the agency’s powers to emerge unscathed.”


CNN agreed. “In recent rulings, this conservative-dominated high court has been diminishing regulatory control for consumer protection, public health and the environment,” reporter Joan Biskupic wrote over this past weekend. “The justices’ opinions have revealed major separation-of-powers concerns, along with a particular disdain for the countless pages of rules government imposes and a disregard for agency expertise, whether involving health services, workplace safety or consumer affairs.”


The most likely scenario, court watchers told Punchbowl, is that “the Supreme Court might pressure or even force Congress to tweak the 2010 statute that created the CFPB in order to preserve the agency’s authority.” If that happens, Rep. Barr’s TABS Act effectively would be “House Republicans’ starting offer.”


But what if the Supreme Court goes further and agrees with the 5th Circuit? What would that mean for the CFPB’s future — and, as importantly, its past?


What Would Happen to CFPB Rulemakings?

According to S&P Global reporter Alison Bennett, if five justices from the Supreme Court agree with the 5th Circuit, it could invalidate “all of the enforcement actions and guidance the CFPB has undertaken since its inception under the Dodd-Frank Act.” Bennet noted that in its appeal, the CFPB pointed to certain industries where the 5th Circuit ruling could have an immediate effect, including the mortgage industry. If CFPB regulations were vacated in this area, for example, the CFPB warned, “mortgage lenders would have to immediately modify the disclosures they give millions of consumers each year, and borrowers could seek to rescind certain mortgage transactions that had relied on regulatory disclosure exceptions.”


Republicans would rejoice if all CFPB rules were overturned — and certainly would be emboldened to pursue legislation like the TABS Act to codify the Supreme Court’s ruling.


As we wrote last fall, however, that regulatory outcome is far from certain, however. Even in 2020 when the Supreme Court ruled that the Dodd-Frank Act’s restriction on the president’s authority to remove the CFPB director was unconstitutional, it did not question the CFPB’s previous body of work. Even Sen. Warren’s comments last October made it clear worries about overturned regulations were entirely speculative. As Banking Dive noted, the senator warned “the decision could prevent the CFPB from enforcing rules that protect consumers, such as from harassment from debt collectors and from banks opening fake accounts.” (Emphasis added.)


We could not find any precedent for a court decision invalidating every single rulemaking an agency ever had made.


But even if the CFPB dodges a bullet from the Supreme Court, if Republicans take over all of Congress after 2024 — and if they win the White House with a candidate like staunch CFPB opponent Ron DeSantis — this saga certainly will continue.


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