U.S. Supreme Court Upholds CFPB Funding Scheme

In Consumer Financial Protection Bureau v. Community Financial Services Assn. of America, Ltd., 601 U.S. ____ (2024), the U.S. Supreme Court upheld the funding scheme that supports the Consumer Financial Protection Bureau (CFPB or Bureau). By a vote of 7-2, the Court held that Congress’ statutory authorization allowing the CFPB to draw money from the earnings of the Federal Reserve System to carry out the bureau’s duties satisfies the Constitution’s Appropriations Clause.

Facts of the Case

The case centers on the Constitution’s Appropriation Clause, which commands that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law. As the Supreme Court explained in Cincinnati Soap Co. v. United States, 301 U.S. 308, 321 (1937), the clause essentially means that “no money can be paid out of the Treasury unless it has been appropriated by an act of Congress.”

For most federal agencies, Congress provides funding through appropriations on an annual basis, requiring those agencies to ask Congress for renewed funding each year. The CFPB is unique in that it does not have to petition Congress for funds each year. Instead, Congress authorized the Bureau to draw from the Federal Reserve System the amount its Director deems “reasonably necessary to carry out” the Bureau’s duties, subject only to an inflation-adjusted cap. The Bureau can also retain and invest unused funds from year to year, though the Director must take into account any surplus when requesting additional funds.

In this case, several trade associations representing payday lenders and credit-access businesses challenged regulations issued by the Bureau pertaining to high-interest consumer loans on both statutory and constitutional grounds. Among other arguments, the associations alleged that that the Bureau “takes federal government money without an appropriations act” in violation of the Appropriations Clause. The Fifth Circuit Court of Appeals agreed, holding that the CFPB’s funding mechanism violates the Appropriations Clause.

Supreme Court’s Decision

The U.S. Supreme Court reversed by a vote of 7-2. Justice Clarence Thomas wrote on behalf of the majority.

As Justice Thomas explained, the associations’ challenge turned solely on whether the Bureau’s funding mechanism constitutes an “Appropriatio[n] made by Law.” The majority ultimately concluded that a valid appropriation must satisfy the minimum requirements of an identifiable source of public funds and purpose.

“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 Thomas wrote.

The Supreme Court went on to find that the CFPB’s funding statute contains the requisite features of a congressional appropriation. “The statute authorizes the Bureau to draw public funds from a particular source—’the combined earnings of the Federal Reserve System,’ in an amount not exceeding an inflation-adjusted cap,” Justice Thomas explained. “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.’”