Supreme Court Rules CFPB Funding Constitutional

 May 17, 2024

In a pivotal decision, the U.S. Supreme Court endorsed the Consumer Financial Protection Bureau (CFPB) 's funding structure. The high court reversed a prior appellate court ruling, safeguarding the financial regulatory agency’s operational independence.

CBS News reported that this recent judgment, delivered with a dominant 7-2 vote, confirms the legality of the CFPB’s funding method under the Appropriations Clause of the U.S. Constitution.

The agency, which protects consumers in the financial sector, receives funding from the Federal Reserve instead of the usual annual appropriations by Congress. For the fiscal year 2022, the CFPB was allocated approximately $641.5 million, significantly less than the $734 million that was potentially available.

Justices Express Strong Opinions in Majority and Dissent

Justice Clarence Thomas penned the majority opinion. He emphasized the traditional flexibility allowed in governmental appropriations: “Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes.

The statute that provides the bureau's funding meets these requirements. We, therefore, conclude that the bureau's funding mechanism does not violate the Appropriations Clause.”

Justice Elena Kagan concurred, elaborating on Congress's long history of creative appropriations, which aligns with constitutional norms.

Meanwhile, Justices Samuel Alito and Neil Gorsuch dissented, expressing concerns regarding the potential implications for fiscal governance.

The roots of this case trace back to 2017 when two trade associations challenged a CFPB rule concerning payday lending. This legal challenge questioned the rule itself and targeted the bureau’s unique funding structure, suggesting it might circumvent Congressional oversight.

Political and Public Reactions to the Decision

The significance of this decision has resonated across various sectors of government and industry. President Joe Biden commented on the outcome, acknowledging the court’s affirmation of the CFPB’s authorization to function, and highlighted the continuing need for robust consumer protections in the face of opposition from powerful interests.

Senator Elizabeth Warren, a staunch advocate for the CFPB since its inception, enthusiastically welcomed the ruling. Senator Warren emphasized the importance of the agency's ongoing role in defending consumers from financial malpractices.

In 2020, the Supreme Court had already ruled on the CFPB's structuring, requiring adjustments but allowing its functions to continue. The recent ruling further entrenches the CFPB's position, enabling it to carry on its mission without the perennial battle for annual funding approvals from Congress.

This ruling effectively ends a long-standing legal battle over the CFPB’s funding mechanism and solidifies its ability to operate independently. By upholding the constitutionality of this funding structure, the Supreme Court has ensured that the CFPB's efforts to regulate the financial market will persist. The decision underscores the judiciary’s interpretation of the Appropriations Clause as sufficiently flexible to encompass the modern complexities of government financing.

Watching how this ruling impacts the political and economic landscapes remains crucial. The affirmation of the CFPB’s funding structure could set a precedent for how independent agencies are financed and managed, potentially influencing a broad spectrum of regulatory practices and the balance of power within the federal government.

About Victor Winston

Victor is a freelance writer and researcher who focuses on national politics, geopolitics, and economics.

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