CU Trades: CFPB Is Unnecessary and Illegally Funded

Learn why CUNA, NAFCU and the AACUL submitted a joint brief to the Supreme Court questioning how the CFPB is funded and its oversight of credit unions.

David Baumann


Jul 11



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David Baumann

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David Baumann

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CUNA, NAFCU and AACUL submit brief questioning bureau oversight of credit unions.

Calling the CFPB’s regulation of credit unions “cumbersome, duplicative and unnecessary,” three credit union trade groups on Monday also told the U.S. Supreme Court that the agency’s funding mechanism is unconstitutional.

“The Bureau has more regulatory power and less congressional oversight of its funding than any other financial regulatory agency in the federal government,” CUNA, NAFCU and the American Association of Credit Union Leagues wrote, in their brief.

Where Things Stand

The Supreme Court is scheduled to hear oral arguments this fall in the CFPB’s appeal of a Fifth Circuit Court of Appeals ruling that the agency is unconstitutionally funded since its money does not flow through the annual appropriations process.

The Second Circuit Court of Appeals has issued an opposite ruling, saying that the agency’s funding is legal.

The Consumer Financial Services Association of America, the respondent in the case, filed its brief last week.

On Monday, a flurry of briefs was filed supporting the position that the agency’s funding scheme is unconstitutional. Those include ones filed by Mick Mulvaney, who served as acting CFPB director during the Trump Administration, a group of Republican state attorneys general and 132 Republican members of Congress.

Democratic state attorneys general and members of Congress have filed briefs supporting the agency.

Briefs Filed Monday

Credit Union Trade Groups

In their brief, the credit union groups stated that the court should issue its ruling and then issue a three- to six-month stay in order for Congress to enact another funding mechanism for the agency. During that stay, they said, the CFPB should pause all rulemaking activities.

The groups also argued that the CFPB is not necessary because credit unions already are regulated by the NCUA.

Of further note to credit unions, the trade groups pushed back on the CFPB’s notion that other financial regulators, including the NCUA, are funded outside the appropriations process.

Credit unions pay an operating fee to fund the NCUA, they said.

“The credit unions paying the NCUA’s annual operating fees are opting in to the NCUA’s system,” the brief states. “If the NCUA’s regulations are, in a particular credit union’s view, less preferable than a particular state’s regulations or no longer align with the institution’s mission, the credit union can switch to a state charter.”

In addition, the groups said, the NCUA is governed by a bipartisan, three-member board rather than a single director.

Mick Mulvaney

Mulvaney, a former House Republican, was an outspoken opponent of the agency while on Capitol Hill.

And he continued that position as director, making it clear that he did not believe in the agency he was charged with running.

In his brief filed Monday, it was apparent Mulvaney’s views have not changed.

The Dodd-Frank Act, which created the bureau, gave “a single director control over hundreds of federal workers and hundreds of millions of dollars,” he wrote.

Mulvaney added that the funding structure deprives “Congress of any meaningful oversight of one of the most impactful federal financial services regulators. By extension, it denies the American citizenry the opportunity to effect change, even if a majority of them want to do so.”

Republican Members of Congress

In their brief, 99 Republican House members and 33 senators sounded familiar themes in arguing that the agency’s funding is unconstitutional.

And, recognizing the current makeup of Congress and the occupant of the White House, they expressed frustration that they cannot cut the CFPB’s funding under Dodd-Frank.

“Because of these provisions, the only way for Congress to reduce the CFPB’s funding level is to amend Dodd-Frank itself and then override an inevitable veto, necessitating supermajorities in both chambers,” they said.

Those filing the brief include Senate Minority Leader Sen. Mitch McConnell, R-Ky.; Senate Banking Committee ranking Republican Sen. Tim Scott and House Financial Services Committee Chairman Rep. Patrick McHenry, R-N.C.

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