In a 7-2 decision today, the U.S. Supreme Court ruled that the mechanism Congress established to fund the CFPB does not violate the Appropriations Clause of the Constitution. Beyond the legal questions addressed in the case, the decision has implications for three other legal actions against the CFPB involving the American Bankers Association: the legal challenges to the Section 1071 small-business data collection final rule, the bureau’s credit card late fee final rule and the CFPB’s update to its UDAAP manual. Those matters will proceed on other legal grounds.
The CFPB receives its funding directly from the Federal Reserve based on a request from the bureau’s director. In CFPB v. Community Financial Services Association of America, the Fifth Circuit Court of Appeals in 2022 ruled that such a funding structure was unconstitutional because Congress ceded direct control over the agency’s budget by insulating it from annual appropriations. The majority of Supreme Court justices rejected that argument in their decision.
“Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes,” said Justice Clarence Thomas, writing for the majority. “The statute that provides the bureau’s funding meets these requirements.”
The funding argument was referenced in the three other ongoing lawsuits brought by ABA against the bureau, but those cases relied on other legal arguments and will continue to be litigated on those other grounds.
In a statement, ABA President and CEO Rob Nichols said that now the Supreme Court has affirmed the CFPB’s funding structure, attention should rightly shift back to the bureau’s recent actions and its willingness to flout the law. “All too often, this CFPB has chosen to ignore the law and the will of Congress with significant negative consequences for the consumers the bureau is supposed to protect, and that must come to an end,” he said.
Nichols added that ABA will continue to advocate for its members and their customers including through litigation where necessary. The association will also continue to call on Congress to establish more accountability for the bureau, he said. “Only by placing limits on this rogue regulator can we ensure that consumers are truly protected and that banks can continue to provide them with the financial products they want and need.”
