Supreme Court Rules Funding for CFPB Does Not Violate U.S. Constitution
On May 16, 2024, the Supreme Court of the United States (SCOTUS) voted 7-2 in an opinion in the case of Consumer Financial Protection Bureau v. Community Financial Services Association of America that the statute providing funding to the Consumer Financial Protection Bureau (CFPB) satisfies the Appropriations Clause in Article I, Section 9 of the U.S. Constitution.
“Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. The statute that provides the Bureau’s funding meets these requirements. We therefore conclude that the Bureau’s funding mechanism does not violate the Appropriations Clause,” the opinion stated.
“The statute that authorizes the Bureau to draw money from the combined earnings of the Federal Reserve System to carry out its duties satisfies the Appropriations Clause. Accordingly, we reverse the judgment of the Court of Appeals and remand the case for further proceedings consistent with this opinion,” Justice Clarence Thomas concluded in the opinion he wrote.
“By a vote of 7-2, the justices reversed a decision by a federal appeals court in Louisiana, which had ruled that the agency’s funding violates the Constitution because it comes from the Federal Reserve rather than through the congressional appropriations process,” noted Amy Howe in her article titled “Supreme Court lets CFPB funding stand” on the SCOTUSblog.
“The CFPB’s funding scheme falls squarely within this definition of a congressional ‘appropriation,’ Thomas concluded: Congress specified the source – the Federal Reserve – from which the CFPB can draw its funding, and it indicated how the CFPB is supposed to use that funding. The court therefore reversed the 5th Circuit’s decision,” Howe explained in the article.
On October 3, 2023, the Supreme Court heard arguments in the case on whether “the CFPB’s funding structure violates Article I, Section 9 of the Constitution, known as the appropriations clause, which provides that ‘[n]o money shall be withdrawn from the Treasury, but in Consequence of Appropriations made by Law,'” according to an earlier article by Howe.
The case began as a challenge by two industry groups to a “payday lending” rule that the CFPB issued in 2017. Created by the “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,” the CFPB has the authority to take action against institutions violating consumer financial laws including the federal Fair Credit Reporting Act (FCRA), which the CFPB enforces.
“This ruling upholds the fact that the CFPB’s funding structure is not novel or unusual, but in fact an essential part of the nation’s financial regulatory system, providing stability and continuity for the agencies and the system as a whole,” the CFPB said in a statement issued regarding the Supreme Court’s decision in the case of CFPB v. CFSA.
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The article “Supreme Court lets CFPB funding stand” by Amy Howe was originally published at Howe on the Court.
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