The Supreme Court ruled on Thursday that the Consumer Financial Protection Bureau's funding is constitutional and satisfies the requirements of the Appropriations Clause.
The majority 7-2 opinion by Justice Clarence Thomas was joined by Chief Justice John G. Roberts, Jr. and Justices Elena Kagan, Brett M. Kavanaugh, Sonia Sotomayor, Amy Coney Barrett and Ketanji Brown Jackson. A dissenting opinion was filed by Justice Samuel A. Alito, Jr., who was joined by Justice Neil M. Gorsuch. A separate concurring opinion was filed by Justice Kagan, joined by Justices Sotomayor, Kavanaugh and Barrett. Justice Jackson filed a separate concurring opinion.
For most federal agencies, Congress provides funding on an annual basis, which forces the agencies to ask Congress for renewed funding every year.
"The Consumer Financial Protection Bureau is different," Thomas wrote for the majority. "In this case, we must decide the narrow question whether this funding mechanism complies with the Appropriations Clause. We hold that it does."
Rohit Chopra, the CFPB's director, responded by saying the Supreme Court had "repudiated the arguments of the payday loan lobby."
"For years, lawbreaking companies and Wall Street lobbyists have been scheming to defund essential consumer protection enforcement," Chopra said in a statement. "The Supreme Court has rejected their radical theory. 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."
The issue that the court had to decide is whether the U.S. Court of Appeals for the 5th Circuit erred in 2022 when it found that the CFPB violated the Appropriations Clause.
Thomas wrote that based on the Constitution's text, as well as the history against which that text was enacted, and congressional practice immediately following ratification, that appropriations only need to identify a source of public funds and "authorize the expenditure of those funds for designated purposes to satisfy the Appropriations Clause."
He then walked through the payday trade groups' three principal arguments for why the CFPB's funding violated the Appropriations Clause and explained why the majority rejected their arguments.
The first argument was that because the CFPB draws an amount annually from the Federal Reserve that is decided upon each year by Congress, the funding is not appropriated.
"This argument proceeds from a mistaken premise," Thomas wrote. "Congress determined the amount of the Bureau's annual funding by imposing a statutory cap. The only sense in which the Bureau decides its own funding, then, is by exercising its discretion to draw less than the statutory cap."
The payday groups also argued that the CFPB's funding was not valid because it is not time limited. Thomas wrote that "the Constitution's text suggests that, at least in some circumstances, Congress can make standing appropriations."
The majority also rejected the trade groups' contention that the CFPB's funding mechanism provides a blueprint for destroying the separation of powers, and that "it invites tyranny by allowing the Executive to operate free of any meaningful fiscal check."
"If the Bureau's funding mechanism is consistent with the Appropriations Clause, the associations reason, then Congress could do the same for any — or every — civilian executive agency. And that, they conclude, would be the very unification of the sword and purse that the Appropriations Clause forbids," Thomas wrote. "The associations offer no defensible argument that the Appropriations Clause requires more than a law that authorizes the disbursement of specified funds for identified purposes. Without such a theory, the associations' Appropriations Clause challenge must fail."
Sen. Sherrod Brown, chair of the Senate Banking Committee, said that special interests had tried to eliminate the bureau — but had failed.
"Powerful corporate special interests know the CFPB stands up to them, which is why they have been trying to gut the agency for over a decade," Brown said in a statement. "Today's decision protects workers and consumers who don't have high-paid lobbyists and lawyers to fight their battles for them."
Sen. Elizabeth Warren, speaking at a press event on the steps of the Supreme Court Thursday, said the lawsuit against the CFPB has "no basis in law," and added that the fact that the Supreme Court had to weigh in to overrule the 5th Circuit is indicative of how extreme that appellate court has become.
"When you have an agency that is this good at doing its job to protect consumers, then a lot of banks, a lot of payday lenders, a lot of Republicans come after it and try to shut it down," Warren said. "And the fact that this particular case, made it all the way to the United States Supreme Court on something that has no basis in the law is a reminder of just how extremist the Fifth Circuit has become and some of our lower courts and that is something of real concern to all of us. But right now we're here to celebrate because the law worked the way it should and the CFPB is here to stay."
Rob Nichols, president and CEO of the American Bankers Association, said the trade group will continue to call on Congress to establish "more accountability for the Bureau."
"With the Supreme Court's ruling today affirming the CFPB's funding structure, attention should rightly shift back to the CFPB's recent actions and its willingness to flout the law," he wrote. All too often, this CFPB has exceeded its statutory authority and the will of Congress with significant negative consequences for the consumers the Bureau is supposed to protect, and that must come to an end."
Lindsey Johnson, president and CEO of the Consumer Bankers Association, said the trade group was "heartened" that the legal question of the CFPB's funding has been resolved but criticized the agency for its "rushed and ill-conceived rulemakings."
"The Supreme Court's holding in favor of the CFPB's constitutionality, however, should not be considered a popular endorsement of the CFPB's recent and seemingly political rulemakings, many of which have skipped important legal requirements and have raised concerns under the Administrative Procedure Act," she said in a statement.
Meanwhile, the Competitive Enterprise Institute, a libertarian think tank, lambasted the Supreme Court for refusing to oversee Congress.
"This decision marks an alarming failure by the Court to police the proper exercise of Congress's constitutional powers," wrote Dan Greenberg, the group's general counsel.
The case began in 2018, when two Texas trade groups sued the CFPB, challenging the bureau's ability to issue the first federal payday lending rule — which will now go into effect.
In 2022, a three-judge panel of the 5th Circuit, all appointed by President Trump, found that the agency's funding through the Federal Reserve System meant it was "doubly insulated" from congressional control because the CFPB does not have to petition Congress for funds each year. Instead, Congress authorized the CFPB to draw its funding from the Federal Reserve System, subject only to an inflation-adjusted cap.
The 5th Circuit judges found that the CFPB had the authority to issue the payday rule but ruled that its funding was unconstitutional. In November, the CFPB
Many had expected the high court would uphold the CFPB's funding based on oral arguments in October. Going forward, several rules and lawsuits that have been on hold pending the outcome of the case, Consumer Financial Protection Bureau v. Community Financial Services Association of America, will now proceed.
In the dissent, Justice Alito, who was joined by Justice Gorsuch, wrote that the majority decision turns the Appropriations Clause into "a minor vestige."
"The Court upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau may bankroll its own agenda without any congressional control or oversight," Alito wrote.
"According to the Court, all that the Appropriations Clause demands is that Congress 'identify a source of public funds and authorize the expenditure of those funds for designated purposes.' Under this interpretation, the Clause imposes no temporal limit that would prevent Congress from authorizing the Executive to spend public funds in perpetuity," Alito wrote.
In a concurring opinion, Justice Kagan wrote that if the CFPB's funding scheme were transplanted back to the late-18th century — or to any other time in the nation's history — it "would have fit right in." She was joined in the concurring opinion by Justices Sotomayor, Kavanaugh and Barrett.
"'Long settled and established practice' may have 'great weight' in interpreting constitutional provisions about the operation of government," Kagan wrote. "The founding-era practice that the Court relates became the 19th-century practice, which became the 20th century practice, which became today's. For over 200 years now, Congress has exercised broad discretion in crafting appropriations. Sometimes it has authorized the expenditure of a sum certain for an itemized purpose on an annual basis. And sometimes it has departed from that model in one or more ways. All the flexibility and diversity evident in the founding period has thus continued unabated, making it ever more obvious that the CFPB's funding accords with the Constitution."
In a separate concurring opinion, Justice Jackson wrote that little more was needed to decide the case given that the Dodd-Frank Act that authorized the CFPB's funding met the minimal requirements of the Appropriations Clause.
"When the Constitution's text does not provide a limit to a coordinate branch's power, we should not lightly assume that Article III implicitly directs the Judiciary to find one," Jackson wrote. "We have made clear in cases too numerous to count that nothing in the Constitution gives federal courts 'some amorphous general supervision of the operations of government.'"
Ebrima Santos Sanneh contributed to this report.
