Consumer Financial Protection Bureau v. Community Financial Services Assn. of America, Ltd.
601 U.S. 416 (2024)
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Rule of Law:
A law that authorizes a government agency to draw funds from a specified source of public money for designated purposes satisfies the Appropriations Clause, even if the authorization is standing and allows the agency's head to determine the amount up to a statutory cap.
Facts:
- In response to the 2008 financial crisis, Congress enacted the Dodd-Frank Act, which created the Consumer Financial Protection Bureau (CFPB).
- The Act authorized the CFPB to be funded by drawing money from the Federal Reserve System, rather than through the annual congressional appropriations process.
- Under the statute, the CFPB Director determines the amount of funding that is "reasonably necessary" to carry out the Bureau's duties.
- The amount the Bureau can draw is subject to an inflation-adjusted statutory cap, originally set at 12 percent of the Federal Reserve System's 2009 total operating expenses.
- The statute also permits the CFPB to retain and invest any funds it does not use in a given year.
- Pursuant to its authority, the CFPB promulgated the "Payday Lending Rule," which restricted certain practices by lenders of high-interest consumer loans.
- Community Financial Services Association of America and Consumer Service Alliance of Texas, two trade associations representing payday lenders and credit-access businesses, were subject to this rule.
Procedural Posture:
- Community Financial Services Association of America and Consumer Service Alliance of Texas sued the Consumer Financial Protection Bureau in the U.S. District Court for the Western District of Texas, challenging its 'Payday Lending Rule'.
- The associations argued, among other things, that the Bureau's funding mechanism violates the Appropriations Clause.
- The district court granted summary judgment to the Bureau, upholding the constitutionality of the funding mechanism.
- The associations, as appellants, appealed to the U.S. Court of Appeals for the Fifth Circuit, with the Bureau as appellee.
- The Fifth Circuit reversed the district court's decision, holding that the Bureau's funding structure is unconstitutional and vacating the Payday Lending Rule.
- The Consumer Financial Protection Bureau, as petitioner, sought and was granted a writ of certiorari from the U.S. Supreme Court.
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Issue:
Does the funding mechanism for the Consumer Financial Protection Bureau, which allows it to draw funds from the Federal Reserve System in an amount its Director deems reasonably necessary up to a statutory cap, violate the Appropriations Clause of the U.S. Constitution?
Opinions:
Majority - Justice Thomas
No. The funding mechanism for the Consumer Financial Protection Bureau does not violate the Appropriations Clause because an appropriation is simply a law authorizing expenditures from a specified source for designated purposes. The statute funding the Bureau clearly identifies a source of public funds—the earnings of the Federal Reserve System—and designates their purpose—to pay the Bureau's expenses in carrying out its duties. This structure is consistent with historical congressional practice dating back to the First Congress, which used lump-sum appropriations and standing, fee-based funding for agencies like the Customs Service and the Post Office. The Constitution's explicit two-year limit on appropriations for the Army implies that no such time limit is required for other government funding.
Concurring - Justice Kagan
No. Joining the majority in full, this opinion emphasizes that the constitutionality of the Bureau's funding is supported not only by founding-era history but also by over 200 years of continuous and varied congressional appropriations practices. Congress has long used standing appropriations, lump-sum grants, and non-Treasury funding sources, particularly for financial regulators like the Office of the Comptroller of the Currency and the Federal Reserve Board. The CFPB's funding mechanism, therefore, fits comfortably within this long-settled tradition of legislative flexibility in funding government operations.
Concurring - Justice Jackson
No. The Court's conclusion is compelled by the plain text of the Appropriations Clause, which only requires a law authorizing expenditures from a specified source for a designated purpose. The judiciary should not invent new, unstated limits on the powers of the political branches. Congress made a considered policy choice to fund the Bureau this way to insulate it from the political influence of powerful regulated entities, and it is not the Court's role to second-guess that legislative judgment.
Dissenting - Justice Alito
Yes. The funding mechanism for the Consumer Financial Protection Bureau violates the Appropriations Clause. The term "Appropriations" is a term of art, shaped by centuries of English and American history, that demands ongoing legislative control over the expenditure of public funds to ensure accountability. The Bureau's unprecedented funding scheme—which is perpetual, self-directed, sourced from outside the Treasury, and allows the agency to accumulate a surplus—is a deliberate abdication of Congress's exclusive power of the purse. This structure gives the CFPB a degree of financial autonomy that the Framers sought to prevent, undermining the core separation-of-powers principle protected by the Appropriations Clause.
Analysis:
This decision broadly interprets Congress's power under the Appropriations Clause, affirming that non-traditional funding mechanisms outside the annual appropriations process are constitutionally sound. The ruling rejects the view that the Clause contains implicit requirements for time limits or greater specificity beyond identifying a source and purpose. This precedent provides strong constitutional protection for other self-funded or independently funded federal agencies, particularly in the financial sector, and significantly narrows the grounds for future constitutional challenges based on an agency's funding structure.
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