Today the U.S. Supreme Court ruled in a 7-2 decision that the Consumer Financial Protection Bureau’s funding structure was constitutional. This is the second time in four years the Supreme Court has rejected a constitutional attack on the CFPB’s authority.
This most recent challenge attacked the Bureau’s funding mechanism which the Court of Appeals for the Fifth Circuit ruled as unconstitutional. Unlike most other federal agencies, the Bureau does not ask Congress for funding. Instead, it obtains its funds by making a request to the Federal Reserve, and that request may not exceed 12% of the Federal Reserve’s “total operating expenses.” The Fifth Circuit held this scheme violated the Constitution’s Appropriations Clause which grants Congress exclusive control over “the federal purse.” The Fifth Circuit reasoned Congress’ funding control is a necessary apparatus to the checks and balances between the three branches of the federal government. The Appropriations Clause prevents “the executive [branch] . . . from unilaterally spending funds,” by allowing Congress to retain control of the purse strings. The CFPB, in the end, holds the strings to the purse, not Congress, and so it is constitutionally defective, according to the Fifth Circuit’s opinion.
Justice Clarance Thomas, writing for the seven-justice majority saw it differently. “Based on the Constitution’s text, the history against which that text was enacted, and congressional practice immediately following ratification, we conclude that appropriations need only identify a source of public funds and authorize the expenditure of those funds for designated purposes to satisfy the Appropriations Clause.”
Justice Samuel Alito delivered a dissent, joined by Justice Gorsuch. The dissent criticized the majority opinion as undermining the checks and balances protection afforded by the Appropriations Clause, causing it to be nothing more than “a minor vestige.”
A concurring opinion was delivered by Just Kagan, which was joined by Justices Sotomayor, Kavanaugh and Barrett. Justice Jackson filed a separate concurring opinion.
The CFPB has issued a press statement on the decision.
This Member Alert is intended for members of the Receivables Management Association International, is for informational purposes only, and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.