The Supreme Court upheld the funding structure for the Consumer Financial Protection Bureau on Thursday, turning aside an argument that would have restricted Congress’ power to set up independent agencies.
The 7-2 decision found that Congress did not violate the Constitution when it set up the funding scheme for the CFPB, a decision that avoided potential ripple effects across agencies such as the Federal Reserve, U.S. Postal Service and others that are funded outside of the normal appropriations process.
Justice Clarence Thomas, writing for the majority, noted the “novel” funding structure Congress used, which allows the CFPB to draw funds from a portion of the funds collected by the Federal Reserve outside the normal appropriations process.
But the opinion said that complied with the Constitution and the Constitution’s Appropriations Clause, which prohibits government spending “but in Consequence of Appropriations made by Law.”
Congress set up the agency in the wake of the 2008 financial crisis. In 2022, for the first time ever, the U.S. Court of Appeals for the 5th Circuit found that clause also limited how Congress could fund agencies.
The 5th Circuit ruled the CFPB’s structure violated the Constitution because Congress allows it to draw funds from the Federal Reserve indefinitely, instead of through the congressional appropriations process.
The Supreme Court decision Thursday overturned that ruling, delving into centuries of history surrounding appropriations, the definition of appropriations around the time of the founding and the lack of an alternative test offered by the challengers.
“Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes,” Thomas wrote. “The statute that provides the Bureau’s funding meets these requirements.”
The case, Consumer Financial Protection Bureau v. Community Financial Services Association of America Ltd., grew out of a challenge to the bureau’s 2017 rule on payday lending from a pair of industry groups.
Thomas’ opinion said the Appropriations Clause did not limit Congress’ ability to structure agencies and that the CFPB structure “fits comfortably” within established practice. Thomas’ opinion also noted the similarities between the CFPB and the fee-based funding for agencies like the U.S. Customs Service and the Postal Service.
The Biden administration had warned that upholding the 5th Circuit decision could also threaten the funding structures of the Customs Service, Postal Service, Federal Reserve and dozens of other federal agencies.
Justice Elena Kagan wrote a concurring opinion, and was joined by Justices Sonia Sotomayor, Brett M. Kavanaugh and Amy Coney Barrett that largely agreed with Thomas’ opinion. Kagan noted a long history of appropriations that are not tied to annual funding, including standing appropriations, “not to exceed” appropriations and other unusual funding schemes.
“The CFPB’s funding scheme, if transplanted back to the late-18th century, would have fit right in,” Kagan wrote.
Justice Ketanji Brown Jackson wrote a separate concurrence that warned against the court engaging in “general supervision” of Congress. She said that the court should have stopped the case after finding that Congress met the minimal requirements of the Appropriations Clause in setting up the CFPB, without having to delve into congressional history.
“When the Constitution’s text does not provide a limit to a coordinate branch’s power, we should not lightly assume that Article III implicitly directs the Judiciary to find one,” Jackson wrote.
Justices Samuel A. Alito, Jr. and Neil M. Gorsuch dissented from the majority, with Alito writing that the decision turned the clause into a “minor vestige” that imposes no real restriction on Congress.
“That holding has the virtue of clarity, but such clarity comes at too high a price. There are times when it is our duty to say simply that a law that blatantly attempts to circumvent the Constitution goes too far,” Alito wrote.
Alito wrote that the majority opinion placed essentially no limits on Congress and could allow for a law that gives the president the unlimited power to spend public funds or authorize public spending to come from entirely private funds.
In the majority opinion, Thomas countered that Alito had too narrow of a definition of “Appropriation” that did not square with centuries of congressional practice.
“Although 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,” Thomas wrote.
The post Supreme Court upholds financial agency’s ‘novel’ funding structure appeared first on Roll Call.
