Supreme Court rules Consumer Financial Protection Bureau’s funding structure is legal

The Supreme Court ruled Thursday that the Consumer Financial Protection Bureau’s funding structure was legal.

The court, by a 7-2 vote, rejected the argument that the CFPB’s funding method violated the Appropriations Clause of the U.S. Constitution because Congress had not authorized the agency’s money each year. Instead, Congress authorized the CFPB to draw from the Federal Reserve System funding that the agency’s director deems necessary for its work.

The decision protects the CFPB from a possible death sentence, given the risk that a bitterly divided Congress will not authorize annual appropriations for the agency in the way traditional for other agencies.

“The law that authorizes the Bureau to take money from the combined revenues of the Federal Reserve to carry out its functions satisfies the Appropriations Clause,” Justice Clarence Thomas, a conservative, wrote for the majority.

“While there may be other constitutional checks on Congress’s power to create and finance an administrative agency, specifying the source and purpose is all the check the Appropriations Clause requires,” Thomas wrote.

Three other conservatives, Chief Justice John Roberts and Justices Brett Kavanaugh and Amy Coney Barrett, as well as the Court’s three liberal justices, Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson, joined the majority opinion.

The court’s two remaining conservative justices, Samuel Alito and Neil Gorsuch, dissented.

Thursday’s decision “confirms a new statutory system” allowing the CFPB to “fund its own program without any control or oversight from Congress,” Alito lamented in his dissent.

“In short, there is apparently nothing wrong with a law that authorizes the Executive to draw as much money as it wishes from any identified source and for any authorized purpose until at the end of time,” he wrote.

The majority decision overturned a decision by the U.S. Court of Appeals for the 5th Circuit, which found the CFPB’s funding mechanism unconstitutional.

Two trade groups representing lenders, the Community Financial Services Association of America and the Consumer Service Alliance of Texas, had challenged the CFPB’s financing structure in the case.

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