Supreme Court Decides Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd.

On May 16, 2024, the Supreme Court decided Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., No. 22-448. The Court held that Congress’ statutory authorization allowing the Consumer Financial Protection Bureau to draw from the Federal Reserve System in an amount that its Director deems “reasonably necessary to carry out” the Bureau’s duties, subject to an inflation-adjusted cap, codified at 12 U.S.C. §§ 5497(a)(1), (2), satisfies the Appropriations Clause.

Most federal agencies must ask Congress for renewed funding each year. However, Congress “diminished this accountability” for the Bureau by providing it with a standing source of funding outside the ordinary annual appropriations process. Each year, the Bureau may requisition from the earnings of the Federal Reserve System “the amount determined by the [Bureau’s] Director to be reasonably necessary to carry out” its duties. § 5497(a)(1). This amount is subject only to a statutory cap, namely 12 percent of the Federal Reserve System’s total operating expenses as reported in fiscal year 2009 (adjusted for inflation). §§ 5497(a)(2)(A)-(B). The cap was approximately $734 million in fiscal year 2022.

In 2017, the Bureau promulgated a regulation focused on high-interest consumer loans. See Payday, Vehicle Title, and Certain High-Cost Installment Loans, 12 CFR pt. 1041 (2018) (Payday Lending Rule). Two trade associations representing payday lenders and credit-access businesses challenged the Payday Lending Rule by arguing that the Bureau “‘takes federal government money without an appropriations act’ in violation of the Appropriations Clause.” The District Court granted summary judgment to the Bureau, but the Fifth Circuit reversed.

The Court held that under the Appropriations Clause, an appropriation is “simply a law that authorizes expenditures from a specified source of public money for designated purposes.” Reviewing the Constitution’s text, history, and congressional practice upon ratification, the Court held that the funding statute contained the requisite features of a congressional appropriation by authorizing the withdrawal of public funds for a designated purpose. The Court rejected the associations’ three principal arguments that the Bureau’s funding statute “is too open-ended in duration and amount to satisfy” the Appropriations Clause. First, Congress decided the Bureau’s annual funding by setting the statutory cap, notwithstanding the Bureau’s discretion to draw less than the cap. Second, the possibility of standing appropriations was consistent with constitutional text and history. Third, the associations’ argument that the funding mechanism “provides a blueprint for destroying the separation of powers” was unpersuasive considering the broader context of the Appropriations Clause. The Court also criticized the dissent’s competing analysis as to the meaning of “Appropriations.”

Justice Thomas delivered the opinion of the Court, in which Chief Justice Roberts and Justices Sotomayor, Kagan, Kavanaugh, Barrett, and Jackson joined. Justice Jackson filed a concurring opinion. Justice Alito filed a dissenting opinion, in which Justice Gorsuch joined.