The Supreme Court on Thursday rejected a challenge over how the Consumer Financial Protection Bureau is funded, a challenge that could have hobbled the bureau and furthered a central goal of the conservative legal movement: limiting the power of independent agencies. .
The vote was 7 to 2, with Justice Clarence Thomas writing the majority opinion.
If the bureau had lost, the court ruling could have called into question all the regulations and compliance measures it had adopted in its 13 years of existence, including those related to mortgages, credit cards, consumer loans and banking.
The central question in the case was whether the way Congress chose to fund the office had violated the Appropriations Clause of the Constitution, which says that “money shall not be withdrawn from the Treasury, but in consequence of appropriations made by law.”
Justice Thomas said the mechanism was constitutional.
“Under the Appropriations Clause,” he wrote, “an appropriation is simply a law that authorizes expenditures of a specific source of public money for designated purposes. The statute providing the office’s funding meets these requirements. Therefore, we conclude that the office’s funding mechanism does not violate the appropriations clause.”
Justice Samuel A. Alito Jr., joined by Justice Neil M. Gorsuch, dissented.
The office, created after the financial crisis as part of the Dodd-Frank Act of 2010, is funded by the Federal Reserve System, in an amount determined by the office, as long as the sum does not exceed 12 percent of the system operating expenses. In fiscal year 2022, the agency requested and received $641.5 million of the $734 million available.
A unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit in New Orleans ruled in 2022 that the office’s funding method conflicted with the Appropriations Clause.
“Wherever the line lies between a constitutionally and unconstitutionally funded agency, this unprecedented agreement crosses it,” Justice Cory T. Wilson wrote in an opinion joined by Justices Don R. Willett and Kurt D. Engelhardt in the failed. President Donald J. Trump appointed the three judges.
The Fifth Circuit’s decision was at odds with those of other courts. In 2018, for example, the District of Columbia Circuit said there was nothing unusual about the funding mechanism.
In 2020, the Supreme Court ruled that a different part of the law creating the consumer bureau was unconstitutional, saying Congress could not insulate the bureau’s director from presidential oversight given the scope of the position’s authority.
“The director has sole responsibility for administering 19 separate consumer protection statutes covering everything from credit cards and car payments to mortgages and student loans,” Chief Justice John G. Roberts Jr. wrote on behalf of most.
He mentioned the office’s funding in passing, noting that its budget had exceeded $500 million in recent years.
“Unlike most other agencies,” the chief justice wrote, “the CFPB does not rely on the annual appropriations process for funding. Instead, the CFPB receives funding directly from the Federal Reserve, which in turn is funded outside of the appropriations process through bank assessments.”
The case, Consumer Financial Protection Bureau v. Community Financial Services Association of America, No. 22-448, was brought by two trade groups representing payday lenders. They questioned a regulation that limits the number of times lenders can attempt to withdraw funds from borrowers’ bank accounts. The Fifth Circuit struck down the regulation, saying it was “entirely crafted through the agency’s unconstitutional funding scheme.”