Today, the U.S. Supreme Court upheld the independent funding structure of the federal Consumer Financial Protection Bureau (CFPB), ensuring that an agency that has returned more than $20 billion in wrongly-taken money to American consumers in the past dozen years will be able to continue doing the work it was designed to do.
The Court’s ruling rejected a challenge by the payday loan industry to the Bureau’s funding structure. Under the 2010 Dodd-Frank Act, the Bureau requests its annual funding not from Congress — like many other federal agencies — but from the Federal Reserve, which itself raises funds from assessments it levies on financial institutions. The Fifth Circuit Court of Appeals had held that the Bureau’s funding mechanism violated the Appropriations Clause of the U.S. Constitution — the first time that any funding statute had been found in conflict with that provision. (Read more about the case in our earlier post.)
The Supreme Court’s 7-2 decision today, authored by Justice Thomas, reversed the Fifth Circuit and upheld Dodd-Frank. The Court held that the Appropriations Clause is “straightforward”: Congress “need only identify a source of public funds and authorize the expenditure of those funds for designated purposes.” The Court traced the Appropriations Clause’s origins from centuries-old British law through founding-era congressional practice. Indeed, as the Court noted, the CFPB’s funding structure resembles those created by the first Congresses for the original U.S. Post Office and Customs Service.
The Court’s simple test for the constitutionality of an appropriation reflects the standard urged by the Solicitor General and by the Center in our amicus brief filed on behalf of 90 state and local nonprofit organizations from 34 states and the District of Columbia. As our brief argued, the principle followed by Congress and legislatures nationwide is that an appropriation is made when the legislation “specifies a funding source and authorizes an express purpose for the funding.” Congress did so for the CFPB in Dodd-Frank: it identified the Federal Reserve monies as a source for the Bureau’s funding and designated those funds for the Bureau’s activities. That process satisfies the requirements of the Appropriations Clause.
Moreover, as the concurring opinion by Justice Kagan and three other justices points out, there is broad “flexibility and diversity” in how appropriations are crafted. Today, examples abound of independently funded federal agencies like the CFPB, including financial regulators like the Office of the Comptroller of the Currency and the Federal Reserve itself. What is more, as the Center’s brief explained, there exist copious examples of similarly structured agencies appearing and thriving among the States -– from financial regulatory agencies in Texas and Indiana to wildlife and agricultural regulators in Wyoming and Washington. Like our brief, Justice Kagan’s concurrence looks to “the way our Government has actually worked.” The prevalence and persistence of independently funded agencies militates for the validity of the appropriations model that supports the Bureau.
The Center for Consumer Law and Economic Justice applauds the Supreme Court’s decision and the continued viability of an agency dedicated to the protection of American consumers — that is, all of us.