The U.S. Supreme Court on May 16, 2024, held 7-2 in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited that Congress statutorily authorized the Consumer Financial Protection Bureau (CFPB) to draw money directly from the Federal Reserve System. The court ruled that the CFPB’s funding structure therefore does not violate the appropriations clause of the U.S. Constitution.
Industry groups had sued the CFPB after the bureau issued a rule aiming to enforce disciplinary action against certain payday lenders. A three-judge panel of the United States Court of Appeals for the Fifth Circuit rejected the challenge to the rule but held that the CFPB’s funding structure, which flows from the Federal Reserve rather than through explicit congressional appropriations, violates the appropriations clause.
The Supreme Court found that the CFPB’s funding structure satisfies the definition of a congressional appropriation. “The Bureau’s funding statute contains the requisite features of a congressional appropriation,” wrote Justice Clarence Thomas in the majority opinion. “The statute authorizes the Bureau to draw public funds from a particular source … And, it specifies the objects for which the Bureau can use those funds—to ‘pay the expenses of the Bureau in carrying out its duties and responsibilities.’”
Justice Samuel Alito authored a dissenting opinion, joined by Justice Neil Gorsuch, arguing “that the Appropriations Clause demands legislative control over the source and disposition of the money used to finance Government operations and projects,” and that the CFPB’s funding mechanism through the Federal Reserve limits congressional oversight of the bureau’s policies.
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