In a 7-2 decision, the Supreme Court upheld the Consumer Financial Protection Bureau’s (CFPB) funding mechanism as constitutional, with two conservative justices, Samuel Alito and Neil Gorsuch, dissenting. The CFPB, unlike other federal agencies, is able to draw funds from the Federal Reserve System that its director deems necessary to carry out its duties, a power that has been a target of Republican criticism. Alito argued that this funding mechanism undermines Congress’s power of the purse and gives the agency too much autonomy without sufficient oversight.
Justice Clarence Thomas, known for his conservative views, led the majority opinion that sided with the Biden administration in preserving the CFPB’s funding mechanism. The opinion was joined by Chief Justice John Roberts, conservative Justices Brett Kavanaugh and Amy Coney Barrett, and the three liberal justices on the court. Thomas argued that the CFPB’s funding mechanism meets the requirements of the Appropriations Clause and does not violate it, directly addressing the arguments raised by the dissenting justices.
The decision marks the end of a battle that posed a significant legal threat to the CFPB, a regulatory agency established in the aftermath of the 2008 financial crisis to combat predatory lending and enforce consumer protection laws. The challenge to its funding mechanism was brought by two lender trade associations and was supported by all of the nation’s Republican state attorneys general. The Supreme Court’s ruling ultimately preserves the CFPB’s ability to operate with its existing funding mechanism.
The dissenting justices, Alito and Gorsuch, expressed concern that the court’s decision undermines Congress’s authority by allowing the CFPB to essentially fund itself without sufficient oversight. Alito argued that the Framers of the Constitution would have disapproved of such a funding scheme, which grants the CFPB significant autonomy in bankrolling its own agenda. Despite their dissent, the majority opinion led by Thomas concluded that the CFPB’s funding mechanism is in line with the requirements of the Appropriations Clause.
This decision highlights a notable break among the conservative justices on the Supreme Court, with Thomas leading the majority opinion that preserves the CFPB’s funding mechanism. The court’s ruling ultimately affirms the agency’s ability to continue its mission of consumer protection and regulation of financial institutions. The battle over the CFPB’s funding has come to a close with the Supreme Court’s decision, ensuring that the agency can operate with its existing funding mechanism.
