Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd.

Today, the Supreme Court issued its decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., a case that challenged the constitutionality of the Consumer Financial Protection Bureau’s (CFPB) funding mechanism. In a 7-2 decision, the Court held that the CFPB’s funding mechanism satisfied the requirements of the Appropriations Clause because Congress authorized funds from a specified source to be used for designated purposes.

What You Need to Know

  • Question presented in this case: Whether the CFPB’s funding structure violates the Appropriations Clause of the Constitution. What does the Appropriations Clause say? The Appropriations Clause provides that “[n]o Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”
  • Background: The CFPB is not funded through the ordinary annual appropriations process. Rather, Congress authorized the CFPB to draw the amount of money that its Director determines is “reasonably necessary to carry out” the CFPB’s responsibilities from the Federal Reserve System, subject to an inflation-adjusted cap. In a case challenging a rule promulgated by the CFPB, the challengers asserted that the CFPB’s funding mechanism was unconstitutional. The district court rejected this argument, but the Fifth Circuit reversed, concluding that the CFPB’s funding mechanism violated the Appropriations Clause.
  • Argument presented to the Court: The challengers argued that the CFPB’s funding violates the Appropriations Clause because the CFPB itself determines the amount of funding to draw from the Federal Reserve System and because the CFPB’s funding is not time limited.
  • What did the Court decide? In a majority opinion authored by Justice Thomas, the Court concluded that “[u]nder the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes.” The Court held that the statute that provides the CFPB’s funding meets these requirements and thus complies with the Appropriations Clause. The Court explained that Congress decided the amount of the CFPB’s funding by imposing a statutory cap and that both text and history supported the use of standing appropriations in some circumstances.
  • Take Away: The Court’s decision will allow the CFPB to continue to use the funding authorized by Congress to ensure markets for consumer financial products are fair, transparent, and competitive. More broadly, the Court’s decision will allow Congress to continue to exercise flexibility and tailor its approach when deciding how to fund agencies.