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CFPB v. Consumer Financial Services Ass’n


In 2017, the Consumer Financial Protection Bureau issued a rule to protect consumers against abuses by companies offering high-interest, short-term loans. A trade group called the Consumer Financial Services Association challenged the rule, arguing, among other things, that the rule was void because the statute that provides funding for the CFPB violates the Constitution’s “Appropriations Clause.” That Clause provides that the federal government may spend money only when Congress has passed a law “appropriating” funds for that purpose. According to the industry challengers, the 2010 Dodd-Frank Wall Street Reform Act, which says the CFPB may fund its activities by requesting a transfer of funds from the Federal Reserve System (subject to a cap set by the law), does not satisfy that requirement.

The case reached the Fifth Circuit Court of Appeals, which court struck down the rule. Although rejecting the trade group’s other challenges, the court of appeals held that the CFPB funding statute is not a valid “appropriation” under the Constitution because it is “self-actualizing” and “perpetual” and frees the agency from having to rely on annual appropriations bills passed by Congress. The court further held that the funding problem affects everything the agency has done—including its promulgation of the payday lending rule—and requires that those actions be set aside.

The Supreme Court granted the CFPB’s petition for certiorari. Public Citizen, on behalf of itself and nine other consumer advocacy groups, filed an amicus brief supporting the CFPB. The brief explained that the CFPB’s funding statute, 12 U.S.C. § 5497, satisfies the requirements of the Appropriations Clause: It specifies the source from which the CFPB may draw funds, the amount it may draw, and the objects for which the funds may be spent. That the statute provides funding with no durational limit does not take it outside Congress’s power under the Appropriations Clause. Likewise, that the funds come from a source other than general federal revenues also does not take them outside the realm of appropriations under the Constitution. Congress has long appropriated to agencies funds derived from fees, assessments, and other revenues attributable to agency activities rather than taxation or government borrowing.

In May 2024, in an opinion relying on the Constitution’s text, history, and congressional practice, the Court issued a decision in favor of the CFPB.