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ALF Argues That CFPB “Self-Funding” Is Unconstitutional

According to its website, the mission of the Consumer Financial Protection Bureau (CFPB) is “making sure you are treated fairly by banks, lenders and other financial institutions.”  When Congress created the CFPB in 2010 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, it sought to ensure that the agency would be an independent financial regulator. To help accomplish that goal, Congress determined that the CFPB should bypass the annual congressional appropriations process. Instead, the CFPB receives its funding directly from the Federal Reserve, whose own funding is independent of congressional appropriations. The CFPB’s Director is authorized to determine how much quarterly funding the agency needs, up to an annual, inflation-adjusted statutory cap, which currently is almost $ 800 million, and to direct the Federal Reserve to provide those funds.  See 12 U.S.C. § 5497(a).

A Fifth Circuit panel held that the CFPB’s self-funding mechanism is unconstitutional because it violates the Appropriations Clause, U.S. Const., art. I, § 9, cl. 7.  This provision embodies the separation of powers between the federal government’s Legislative and Executive Branches. As a crucial check against uncontrolled Executive Branch spending and activities, the Appropriations Clause assigns the “power of the purse” to Congress alone. This means that congressional appropriations legislation is required to cover all Executive Branch spending and activities, including the CFPB’s operations.

The Supreme Court has agreed to review the constitutionality of the CFPB’s self-funding mechanism. The case arises in the context of a challenge to a CFPB “payday lending rule.”

ALF has filed an amicus brief arguing that under the Supreme Court’s “nondelegation doctrine,” Congress cannot cede its exclusive Appropriations Clause power and responsibility to the CFPB, or to any other Executive Branch entity, such as the Federal Reserve. The CFPB’s self-funding mechanism, which bypasses the congressional appropriations process, is therefore unconstitutional.

Issue Areas:

Free Enterprise, Limited Government, Separation of Powers

Read the Amicus Brief:
Question(s) Presented:

Whether the  CFPB’s statutory authorization to choose its own amount of annual public funding subject only to an illusory cap, in perpetuity and for core executive powers, violates the Appropriations Clause.

ALF’s Amicus Brief:

ALF’s amicus brief argues that “[t]he self-appropriation procedure established by 12 U.S.C. § 5497(a) violates the Appropriations Clause by bypassing the requirement for appropriations legislation.”

The brief explains that the nondelegation doctrine is rooted in the separation of powers.  Supreme Court nondelegation precedent establishes that to preserve the separation of powers, Congress must provide an “intelligible principle” when it exercises its general legislative power by enacting a statute that vests a federal department or agency with discretionary authority. But the Court’s intelligible principle case law does not apply to the Appropriations Clause. ALF’s brief explains why:

“The nondelegation doctrine in its purest form renders § 5497(a) unconstitutional.  There is no ‘intelligible principle’ that would enable Congress to delegate its express, specifically assigned, and exclusive duty under the Appropriations Clause to control the government’s purse strings.  Delegation by Congress of a duty that the Constitution assigns exclusively to Congress is a contradiction in terms.”

The amicus brief observes that the CFPB is “an egregious example of how Congress knowingly and unabashedly has breached its duties under the Appropriations Clause.”  This “deliberate attempt to insulate the CFPB from the annual appropriations process is emblematic of both political branches’ chronic disrespect for the Appropriations Clause.”

“Through this case,  the Court should send a long overdue wakeup call to both Congress and the Executive Branch that the Appropriations Clause—the Article I portal through which all expenditures of federal funds must pass—means what it says.  Indeed, this case may represent the last clear chance to restore the Appropriations Clause to its original purpose and full effect.”

ALF’s amicus brief was authored by Executive Vice President & General Counsel Larry Ebner with substantial input from ALF Advisory Council member Herb Fenster.


On May 16, 2024, the Court issued a 7 to 2 opinion holding that the CFPB’s self-funding mechanism satisfies the Constitution’s Appropriations Clause.


Email ALF Executive Vice President & General Counsel Larry Ebner

Date Originally Posted: July 6, 2023

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