The Supreme Court on Thursday rejected a broad challenge to the Consumer Financial Protection Bureau, reversing a lower-court ruling that would have undermined the watchdog agency Congress created 12 years ago in the wake of the financial crisis.

The CFPB ruling is the first of a series of decisions the justices will issue this term on the power and reach of federal agencies, long a target of conservatives and some corporate interests. In a 7-2 decision written by Justice Clarence Thomas, the court said the CFPB’s funding mechanism is constitutional. The agency is funded through profits of the Federal Reserve, not an annual appropriation by Congress.

An adverse ruling could have raised broader questions about how Congress funds the Federal Reserve and even Social Security and payments to the national debt. It might have also opened challenges to a decade of enforcement actions and more than $20 billion recovered by the CFPB on behalf of consumers.

Thomas wrote that, under the Constitution, “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,” he added.

Two other conservative justices, Neil Gorsuch and Samuel A. Alito, dissented, saying the ruling would allow the agency to “bankroll its own agenda” without oversight from Congress.


“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,” Alito wrote.

The case involved a decision by the conservative U.S. Court of Appeals for the 5th Circuit that said the funding source Congress adopted to ensure the CFPB’s independence violated the Constitution’s command requiring congressional appropriation of money. The decision, by panel of three judges nominated by President Donald Trump, said the agency’s insulation from congressional committees doubled the violation.

The Court of Appeals found “even among self-funded agencies, the Bureau is unique,“ adding its creation was “an innovation with no foothold in history or tradition.”

The Biden administration rejected the 5th Circuit’s view, telling the justices that the Constitution bestowed the power of the purse to Congress but set few limits on how appropriations could be made.

The CFPB was created by Congress in response to the 2008 financial crisis, putting scattered federal consumer protections under one structure. Sen. Elizabeth Warren, D-Mass., who at the time advised the Obama administration, played a lead role in the legislation.

“This isn’t the last attack on the CFPB we’ll see from Wall Street, the banks, and their Republican allies,” Warren said in a statement. “When an agency is this effective at sticking up for working families against industry’s consumer abuses, it’s an obvious target for multimillion dollar lobbying campaigns.”


The Dodd-Frank Wall Street Reform and Consumer Protection Act moved to insulate the CFPB from political influence by making the agency independent from Congress’s annual appropriation process.

The agency instead is funded from the profits of the Federal Reserve, which itself is funded through bank assessments. The bureau’s budget may not exceed 12% of the Fed’s annual operating expenses, or $734 million in 2022. So far, the agency has not asked for all of its authorized budget in any given year.

Thursday’s ruling exposed an unusual split between the court’s most conservative members on how to read the appropriations clause of the Constitution.

Thomas said that based on historical practice Congress need only “identify a source of public funds and authorize the expenditure of those funds.” Alito, joined by Gorsuch, disagreed.

In a separate concurrence, Justice Elena Kagan said it is not just founding-era history that supports the CFPB’s funding structure, but also continuing tradition and practice.

“Throughout our history, Congress has created a variety of mechanisms to pay for government operations,” she wrote, joined by Justices Sonia Sotomayor, Brett Kavanaugh and Amy Coney Barrett. “Whether or not the CFPB’s mechanism has an exact replica, its essentials are nothing new.”

The case, Consumer Financial Protection Bureau v. Community Financial Services Association of America, began as a challenge to the Payday Lending Rule, the CFPB regulations for payday loans, car title loans and other loans with high interest rates. The association, which is a trade group for payday lenders, challenged the rule on statutory and constitutional grounds. But the appeals court seized on a separate argument over the CFPB’s funding structure to invalidate the rule.

The most consequential remaining cases before the court that could reshape federal power are a pair of lawsuits challenging Chevron, a landmark ruling that requires courts defer to federal agency’s interpretations of ambiguous laws as long as those readings are reasonable. The legal precedent established by Chevron has formed the basis for countless federal regulations.

Lower courts still rely on the ruling, but the Supreme Court has moved away from its holdings in recent years.

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