The Supreme Court ruled today that the funding structure of the Consumer Financial Protection Bureau is constitutional and does not need to change. Had the ruling gone the other way, there was the possibility that the CFPB could have been de-funded. The justices voted 7-2 in favor of upholding the funding structure, which allows the CFPB to draw money directly from the Federal Reserve Board and not through the Congressional appropriations process.
Justice Samuel Alito Jr., and Justice Neil Gorsuch were the lone dissenters. Chief Justice John Roberts, Justice Clarence Thomas, Justice Sonia Sotomayor, Justice Elena Kagan, Justice Brett Kavanaugh, Justice Amy Coney Barrett, and Justice Ketanji Brown Jackson voted for the majority.
“For years, lawbreaking companies and Wall Street lobbyists have been scheming to defund essential consumer protection enforcement,” the Bureau said in a statement. “The Supreme Court has rejected their radical theory that would have devastated the American financial markets. The Court repudiated the arguments of the payday loan lobby and made it clear that the CFPB is here to stay.”
The case reversed a ruling from the Court of Appeals for the Fifth Circuit, which ruled back in 2022 that the CFPB’s funding structure was unconstitutional. “Congress’s decision to abdicate its appropriations power under the Constitution, i.e., to cede its power of the purse to the Bureau, violates the Constitution’s structural separation of powers,” the panel wrote in its ruling.
When it was enacted, Congress wanted the CFPB to be independent and not subject to the whims of Congress, so the CFPB gets its funds directly from the Federal Reserve. Most federal agencies must receive their funds from Congress, which approves their budgets. A number of groups attacked that premise, saying the funding structure is unconstitutional.
The case revolves around a small-dollar lending rule introduced by the CFPB in 2017, which drew significant opposition from the payday lending industry. The Community Financial Services Association of America and Consumer Service Alliance of Texas filed a lawsuit, arguing that the CFPB’s payday rule was implemented arbitrarily, exceeded statutory authority, and violated the Constitution.
“Under the appropriations clause,” wrote Justice Thomas, who authored the majority opinion, “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 entire financial services industry had been waiting for this ruling, wondering whether the Supreme Court would find the funding structure constitutional or not. Had it ruled the other way, the Supreme Court could have effectively invalidated 13 years of regulation and enforcement actions by the CFPB.
“In short, there is apparently nothing wrong with a law that empowers the Executive to draw as much money as it wants from any identified source for any permissible purpose until the end of time,” wrote Justice Alito in his dissenting opinion.
