Last week, the Supreme Court upheld (7-2) the constitutionality of the funding method as determined by Congress for the Consumer Financial Protection Bureau (CFPB), allowing a vital agency to continue its work in holding Wall Street and predatory lenders to account and promoting economic and racial justice.
Consumer Financial Protection Bureau, et al. v. Community Financial Services Association Of America, Ltd., et al., brought by trade associations representing payday lenders and credit-access businesses, challenged the unique funding structure of the CFPB by claiming it violated the Appropriations Clause of the Constitution. Under the 2010 Dodd-Frank Act, the Bureau requests its annual funding not from Congress—like many other federal agencies—but from the Federal Reserve, which itself raises funds from assessments it levies on financial institutions.
In the Supreme Court opinion released on May 16, Justice Clarence Thomas succinctly stated the constitutionality of the CFPB’s funding: “Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. The statute that provides the Bureau’s funding meets these requirements. We therefore conclude that the Bureau’s funding mechanism does not violate the Appropriations Clause. “
Tzedek DC and ninety other coalition member organizations from 34 states and DC filed an amicus brief urging the U.S. Supreme Court that the CFPB independent funding mechanism does not violate the Appropriations Clause of the U.S. Constitution in May 2023. At the time, Tzedek DC and allies warned a finding against the CFPB could plunge the housing and financial markets into chaos by undermining years of consumer protections rulemaking and enforcement and threaten the funding of dozens of independent state regulatory agencies across the country.
The Court’s simple test for the constitutionality of an appropriation reflects the standard urged by the Solicitor General and by Tzedek DC and allies in the amicus brief. The brief argued that the principle followed by Congress and legislatures nationwide is that an appropriation is made when the legislation “specifies a funding source and authorizes an express purpose for the funding.” Congress did so for the CFPB in Dodd-Frank: it identified the Federal Reserve monies as a source for the Bureau’s funding and designated those funds for the Bureau’s activities. That process satisfies the requirements of the Appropriations Clause.
Since its creation, the CFPB has won more than $19 billion in relief for consumers ripped off by big banks and other financial wrongdoers. Recently the agency has pursued policies to rein in junk fees that cost families tens of billions of dollars each year, including by finalizing a rule to cap excessive credit card late fees and proposing limits on punitive overdraft fees. Other key initiatives include requiring fairer credit reports, reducing the harm of medical debt collections, fighting inequity in home appraisals, increasing consumer rights to control their own data, and much more.
Tzedek DC applauds the Supreme Court’s decision and the continued viability of an agency dedicated to the protection of American consumers—that is, all of us.
About Tzedek DC
Tzedek DC’s name is drawn from the ancient Jewish teaching “Tzedek, tzedek tirdof,” or “Justice, justice you shall pursue.” Headquartered at the University of the District of Columbia David A. Clarke School of Law, Tzedek DC’s mission is to safeguard the legal rights and financial health of DC residents with lower incomes facing the often-devastating consequences of debt collection and credit-related obstacles. This mission is carried out as anti-racism work in response to the massive wealth gaps tracking race in DC and nationwide. Tzedek DC seeks to serve and empower its client base, which is comprised of 90% Black people, 60% women, and 25% disabled community members. Our strategic approach combines three synergistic activities: (i) free direct services—legal representation and advice and financial counseling; (ii) working in coalition to make systemic change; and (iii) providing bilingual community legal education on debt collection, identity theft, and credit management. Since 2017, Tzedek DC has served over 3,000 client households in legal matters and catalyzed systemic reforms benefiting hundreds of thousands of DC residents.