In a critical recent development, the US Supreme Court on May 16, 2024, turned down an appeals case that challenged the constitutionality of the Consumer Financial Protection Bureau’s (CFPB) funding structure. With a conspicuous 7-2 vote, the justices reversed a prior ruling by a federal appeals court in Louisiana. The lower court had posited that the CFPB’s financing, originating from the Federal Reserve rather than via the traditional congressional appropriations pathway, infringed upon the Constitution.
Justice Clarence Thomas, who wrote for the majority, grounded his argument in Constitutional text and early US and English history. The court’s decision was shared by justices Sonia Sotomayor, Brett Kavanaugh, Neil Gorsuch, Amy Coney Barrett, and Ketanji Brown Jackson, as well as Chief Justice John Roberts.
On the other hand, Justice Samuel Alito, joined by Justice Neil Gorsuch, expressed dissent. Alito expressed the view that the funding mechanism for the CFPB directly attempted to sidestep Constitutional regulations.
The CFPB’s financing model was initially designed to foster its independence. According to the Fifth Circuit, however, it defies Article I, Section 9 of the Constitution. The court noted that the clause states “[n]o money shall be withdrawn from the Treasury, but in Consequence of Appropriations made by Law” and took issue with the CFPB’s funding being “double-insulated” from Congress’ appropriations power.
Amy Howe reported on SCOTUSblog.com that, according to the justices, when the Constitution was ratified in the late 18th century,”appropriations were understood as a legislative means of authorizing expenditure from a source of public funds for designated purposes.” This definition of appropriations includes the funding scheme of CFPB, essentially making it Constitutional.
Based on these assessments, the Supreme Court overturned the 5th Circuit’s decision to strike down the CFPB’s funding mechanism declaring it unconstitutional.
Overall, this significant case, coming in the wake of multiple others related to governmental authorities’ allocation, offers a keen illustration of the complexities and debates surrounding the current state of administrative agency power.