The Supreme Court ruled Thursday that the Consumer Financial Protection Bureau is lawfully funded by Congress, dealing a blow to conservatives who have long had the watchdog in their crosshairs.
In a 7-2 decision, the high court rejected arguments that the banking regulator’s use of the Federal Reserve System for funding unlawfully sidestepped Congress’ power of the purse.
“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,” conservative Justice Clarence Thomas wrote for the majority.
Two lender trade associations had brought the challenge to the independent agency, created in 2011 following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in the aftermath of the Great Recession.
Lawmakers had concocted the funding structure with the intent of shielding CFPB from political pressure during the annual appropriations process in Congress.
However, conservatives argued that allowing CFPB to get as much as $600 million a year from the Fed rendered the agency unconstitutionally unaccountable to Americans’ elected representatives.
If the payday lenders had prevailed, the court could have invalidated every action taken by the agency since its inception.
The lending groups initially challenged CFPB in 2017 over a rule restricting illegal debits from bank accounts. The conservative Fifth Circuit Court of Appeals had previously sided with the payday lenders.
Justices Samuel Alito and Neil Gorsuch dissented.
“Unfortunately, today’s decision turns the Appropriations Clause into a minor vestige,” Alito argued. “The Court upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau (CFPB) may bankroll its own agenda without any congressional control or oversight.”
Former President Donald Trump’s administration repeatedly explored ways to gut CFPB, but President Biden has worked to bolster it.
More than 130 Republicans in Congress and former House Speaker John Boehner (R-Ohio) backed the lenders, noting the Constitution’s Appropriations Clause states that “[n]o money shall be withdrawn from the Treasury, but in Consequence of Appropriations made by Law.”
But the majority found that based on the “Constitution’s text, the history against which that text was enacted, and congressional practice immediately following ratification,” CFPB’s funding structure was permissible.
Since the agency’s founding, conservatives have complained about the extent of its powers to litigate civil actions, conduct investigations, and open administrative proceedings.
In 2020, the court ruled 5-4 that CFPB’s leadership structure was unconstitutional, but stopped short of scrapping the agency itself.
