Consumer Financial Protection Bureau v. Community Financial Services Assn. of America, Ltd.
601 U.S. 416 (2024)
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Rule of Law:
Under the Appropriations Clause, a law that authorizes expenditures from a specified source of public money for designated purposes is a valid appropriation. The Clause does not require Congress to specify the amount of funding or impose a time limit on the authorization.
Facts:
- In response to the 2008 financial crisis, Congress enacted the Dodd-Frank Act, which created the Consumer Financial Protection Bureau (CFPB) to enforce consumer financial protection laws.
- Congress structured the CFPB to be funded not through annual congressional appropriations, but by drawing funds from the combined earnings of the Federal Reserve System.
- The governing statute permits the CFPB's Director to request an amount deemed 'reasonably necessary' to carry out the Bureau's duties.
- This funding is subject to a cap, originally set at 12 percent of the Federal Reserve System's total operating expenses as reported in fiscal year 2009, and adjusted annually for inflation.
- In 2017, the CFPB promulgated the 'Payday Lending Rule,' which regulated high-interest consumer loans.
- The rule restricted lenders' ability to obtain loan payments through preauthorized access to a borrower's bank account after two consecutive unsuccessful withdrawal attempts.
- Community Financial Services Association of America, Ltd., and Consumer Service Alliance of Texas are trade associations representing payday lenders and credit-access businesses whose operations are subject to the Payday Lending Rule.
Procedural Posture:
- Community Financial Services Association of America, Ltd., and another trade group sued the Consumer Financial Protection Bureau in the U.S. District Court for the Western District of Texas.
- The plaintiffs challenged the validity of the CFPB's 'Payday Lending Rule,' arguing that the Bureau's funding mechanism violates the Appropriations Clause.
- The District Court granted summary judgment to the Bureau, finding no constitutional violation.
- The trade associations (appellants) appealed to the U.S. Court of Appeals for the Fifth Circuit.
- The Fifth Circuit reversed, holding that the CFPB's 'self-actualizing, perpetual funding mechanism' is unconstitutional under the Appropriations Clause and the separation of powers.
- The Consumer Financial Protection Bureau (petitioner) successfully petitioned the U.S. Supreme Court for a writ of certiorari.
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Issue:
Does the statute authorizing the Consumer Financial Protection Bureau to draw its funding from the combined earnings of the Federal Reserve System, subject to an inflation-adjusted cap, violate the Appropriations Clause of the U.S. Constitution?
Opinions:
Majority - Thomas, J.
No, the statute authorizing the Bureau's funding does not violate the Appropriations Clause. An 'Appropriation made by Law' is simply a statute that identifies a source of public funds and authorizes the expenditure of those funds for designated purposes. The CFPB's funding mechanism meets these requirements by specifying the Federal Reserve's earnings as the source and the Bureau's operating expenses as the purpose. This structure is consistent with the text of the Constitution, historical appropriations practices in England and early America, and the practices of the First Congress, which often used lump-sum appropriations ('sums not exceeding' a cap) and standing, non-time-limited funding for agencies like the Customs Service and Post Office. The associations' arguments that an appropriation must have a specific amount or a time limit are unpersuasive, as the Constitution only imposes a time limit for army appropriations, and 'sums not exceeding' grants were commonplace at the founding.
Concurring - Kagan, J.
No. The majority opinion is correct, and its conclusion is further supported by the unbroken, 200-year history of congressional practice following the founding. Throughout American history, Congress has consistently used a wide variety of flexible appropriation methods, including lump-sum grants, standing (non-time-limited) appropriations, and assessment-based funding, particularly for financial regulators like the Office of the Comptroller of the Currency and the Federal Reserve Board. The CFPB's funding scheme, while perhaps novel in its exact details, fits squarely within this long-settled and established tradition of legislative innovation in funding government operations.
Concurring - Jackson, J.
No. The case is resolved by the plain text of the Appropriations Clause. The statute authorizing the CFPB's funding is a law that specifies a source of money and a designated purpose, which is all the Constitution requires. Courts should not invent additional limits on a coordinate branch's power where the text provides none, especially when Congress designed the funding scheme to address a pressing national concern (the 2008 financial crisis) and insulate the agency from the influence of powerful regulated entities.
Dissenting - Alito, J.
Yes, the statute 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 executive to protect the people's power of the purse. The majority's simplistic 'source-and-purpose' test turns the Clause into a 'minor vestige.' The CFPB's funding scheme is historically unprecedented in its combination of features: it is perpetual, the agency determines its own funding level up to a high cap, the source is not Congress, and the agency can keep and invest surplus funds. This design grants the CFPB a level of financial autonomy that a Stuart king would envy, making it unaccountable to Congress and subverting the separation of powers that the Appropriations Clause was meant to protect.
Analysis:
This decision broadly defines Congress's authority under the Appropriations Clause, affirming that Congress can create agencies with standing, non-lapsing funding outside the annual appropriations process. The ruling rejects the Fifth Circuit's functionalist interpretation that the Clause requires an ongoing 'power of the purse' check on the executive. By validating the CFPB's funding, the Court also implicitly secures the funding structures of other similarly funded financial regulators (e.g., the Federal Reserve, FDIC, OCC), and provides a constitutional blueprint for Congress to insulate future agencies from the political pressures of the annual budget cycle.
