In its final decision of Consumer Financial Protection Bureau v. Community Financial Services Association of America, LTD. (the Case), the Supreme Court ruled that Congressional funding of the CFPB did not violate the appropriations clause.1 The 7-2 decision ends seven months of waiting after oral arguments were heard in October 2023.
The case, initially a challenge to the CFPB's payday lending
rule by the Community Financial Services Association of America
(CFSA), reached the Supreme Court following a U.S. Court of Appeals
for the Fifth Circuit decision which ruled that the CFPB's
funding mechanism violated the appropriations clause. The
appropriations clause (Article I, section 9 of the Constitution of
the United States), establishes that money drawn from the Treasury
must be appropriated by Congress2, but the CFPB's
budget is set independent of congressional appropriations processes
by the Fed.
The Supreme Court, however, largely disagreed. The funding is, in
its essence, appropriated by Congress via legislation, which the
Court explains aligns with historical precedent and intent.
"Congress took even more flexible approaches to appropriations
for several early executive agencies, allowing them to indefinitely
fund themselves from revenue collected. For example, Congress
adopted open-ended fee- and commission-based funding schemes for
Customs Service and the Post Office."3 CFSA,
Justice Thomas writes in the majority opinion, had offered
"...no defensible argument that the Appropriations Clause
requires more than a law that authorizes the disbursement of
specified funds for identified purposes..."
Joining Thomas were Justices Sotomayor, Kagan, Kavanaugh, Barrett, Jackson, and Chief Justice Roberts. Both Justice Kagan (joined by Justices Sotomayor, Kavanaugh, and Barrett) and Justice Jackson filed concurrent opinions, and Justice Alito filed a dissent joined by Justice Gorsuch.
The Court's decision is not a total surprise, though, with the seven months of wait paired with the Court's previous decision in 2020's Seila Law LLC v. Consumer Financial Protection Bureau,4 which ruled that the for-cause removal restrictions placed on the Director were a violation of the separation of powers, no one would have blamed the CFPB for being nervous. The CFPB has touted this as a "resounding victory for American families and honest businesses alike, ensuring that consumers are protected from predatory corporations and that markets are fair, transparent, and competitive."5 There are, however, some who are concerned that this removes necessary checks on funding provided by the Appropriations Clause.
For the time being, the CFPB is expected to move forward with renewed confidence in its legitimacy as a congressionally funded agency.
Footnotes
1. https://www.supremecourt.gov/opinions/23pdf/22-448_o7jp.pdf
3. https://www.supremecourt.gov/opinions/23pdf/22-448_o7jp.pdf
4. https://www.supremecourt.gov/opinions/19pdf/19-7_n6io.pdf
5. https://consumerfinance.gov/about-us/newsroom/statement-on-supreme-court-decision-n-cfpb-v-cfsa/
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.