Supreme Court upholds Consumer Financial Protection Bureau, rejecting GOP challenge

The Supreme Court preserved the Consumer Financial Protection Bureau (CFPB) on Thursday by upholding the agency’s funding mechanism as constitutional in a 7-2 vote. 

The justices’ decision caps a battle that marked the biggest legal threat to the CFPB since it was established in the wake of the 2008 financial crisis to crack down on predatory lending and enforce consumer protection laws. 

Two lender trade associations, backed by business groups and all the nation’s Republican state attorneys general, contended the agency’s funding from the Federal Reserve violates Congress’s power of the purse.  

Writing for the majority, Justice Clarence Thomas rejected that argument and sided with the Biden administration. 

“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. We therefore conclude that the Bureau’s funding mechanism does not violate the Appropriations Clause,” he continued. 

Conservative justices Samuel Alito and Neil Gorsuch dissented, writing that since the “earliest days” of the nation, Congress’s power of the purse has been its most “complete and effectual weapon.” 

“Unfortunately, today’s decision turns the Appropriations Clause into a minor vestige,” Alito wrote. “The Court upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau (CFPB) may bankroll its own agenda without any congressional control or oversight.” 

Established as part of the Dodd-Frank Wall Street reform law, lawmakers looked to insulate the CFPB by creating a funding mechanism outside Congress’s annual appropriations process. 

Republicans have long targeted the independent agency, lamenting that lawmakers have little control over it. Former House Speaker John Boehner (R-Ohio) and 132 Republican members of Congress filed briefs backing the challengers. 

The high court acknowledged that the CFPB is “different” than other agencies but determined its method of drawing funds from the Federal Reserve System that its director has deemed “reasonably necessary to carry out” is constitutional.  

The Supreme Court handed the challengers a major victory in 2020 by ruling the CFPB’s leadership structure was unconstitutional, though the decision still left the agency in place. 

Updated at 10:37 a.m.

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