press release

CBA Statement on Supreme Court Decision on Constitutionality of CFPB Funding

Weston Loyd
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WASHINGTON, D.C. – Consumer Bankers Association (CBA) President and CEO Lindsey Johnson today released the following statement regarding the Supreme Court of the United States’ decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America, a case about the constitutionality of the funding structure of the Consumer Financial Protection Bureau (CFPB). The Supreme Court, in a 7-2 ruling, held that the Consumer Financial Protection Bureau’s funding is constitutional. 

“CBA is heartened that this important legal question has been resolved. The Supreme Court’s holding in favor of the CFPB’s constitutionality, however, should not be considered a popular endorsement of the CFPB’s recent and seemingly political rulemakings, many of which have skipped important legal requirements and have raised concerns under the Administrative Procedure Act. Any agency, even if its funding is constitutional, is unfortunately capable of engaging in rushed and ill-conceived rulemakings, as the CFPB has recently.

“CBA looks forward to continuing to work with the CFPB, as we have for nearly 13 years, to further a safe and competitive financial marketplace.” 

Background

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB receives its funding through requests made by the CFPB Director to the Federal Reserve, subject to a cap equal to 12 percent of the Federal Reserve’s revenues, rather than through the Congressional appropriations process. On October 19, 2022, a unanimous three-judge panel of the U.S. Court of Appeals for the Fifth Circuit ruled that the CFPB’s funding mechanism violated the U.S. Constitution’s Appropriations Clause and the separation of powers principles on which it is based.

The CFPB filed a petition for a writ of certiorari with the Supreme Court, requesting a review of the Fifth Circuit’s decision. Oral arguments for the case were heard by the Supreme Court on October 3, 2023. Central to the arguments were whether the CFPB’s historically unique funding structure, which is “doubly insulated” from the congressional appropriations process, runs afoul of the U.S. Constitutional requirement that “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.”

Commentators in favor of the constitutionality of the CFPB’s funding were concerned a holding that the CFPB’s funding structure was unconstitutional would threaten the validity of all past CFPB actions, risking severe market disruption.

Opinion

Writing for the majority, Justice Thomas reasoned that the term “appropriations” historically has referred to a legislative means of authorizing expenditures from public funds for designated purposes. The CFPB draws public funds from a particular source and can only use those funds for a specific purpose – paying the expenses of the CFPB in carrying out its duties and responsibilities – which is consistent with the Appropriations Clause. Justice Thomas noted that, “[a]lthough there may be other constitutional checks on Congress’ authority to create and fund an administrative agency, specifying the source and purpose is all the control the Appropriations Clause requires.”

In a concurring opinion, Justice Kagan – joined by Justices Sotomayor, Kavanaugh, and Barrett – asserted that although Justice Thomas focused on the constitutionality of the CFPB’s funding structure as the Appropriations Clause was understood at the time of the Constitution’s ratification, the group “write[s] separately to note that the same would have been true at any other time in our Nation’s history” and emphasize “[t]he way our Government has actually worked, over our entire experience, thus provides another reason to uphold Congress’s decision about how to fund the CFPB.” 

In a separate concurring opinion, Justice Jackson supported the majority’s conclusion that the CFPB’s funding structure is constitutional, but cautioned the Supreme Court against substituting its judgments on policy in place of those of another government branch, writing, “[i]n urging us to fund the [CFPB’s] funding scheme unconstitutional, then respondents would not only have us find unstated limits in the Constitution’s text, but they would have us undercut the considered judgments of a coordinate branch about how to respond to a pressing national concern.”

Justices Alito and Gorsuch dissented. Writing for the duo, Justice Alito opined that, under the majority’s opinion, “there is apparently nothing wrong with a law that empowers the Executive to draw as much money as it wants from any identified source for any permissible purpose until the end of time.” Justice Alito further lamented that “the CFPB enjoys a degree of financial autonomy that a Stuart king would envy” and is able to pursue major changes in consumer protection law – including changes to overdraft and removing medical bills from credit reports – without specific authorization from Congress, which in his and Justice Gorsuch’s view is violative of the Appropriations Clause.

CBA Advocacy

  • CBA, along with several other trades, filed an amicus curiae brief supporting CFSA on July 10, 2023.

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