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Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited
 | |
| Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited | |
| Term: 2023 | |
| Important Dates | |
| Argued: October 3, 2023 Decided: May 16, 2024 | |
| Outcome | |
| United States Court of Appeals for the Fifth Circuit reversed and remanded | |
| Vote | |
| 7-2 | |
| Majority | |
| Clarence Thomas • Chief Justice John Roberts | |
| Concurring | |
| Elena Kagan • Sonia Sotomayor • Brett Kavanaugh • Amy Coney Barrett • Ketanji Brown Jackson | |
| Dissenting | |
| Samuel Alito • Neil Gorsuch | |
Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited is a United States Supreme Court case decided 7-2 on May 16, 2024, concerning whether the funding structure of the Consumer Financial Protection Bureau (CFPB) violates the appropriations clause of the U.S. Constitution. The U.S. Supreme Court held that Congress statutorily authorizes the CFPB to draw money from the Federal Reserve System and therefore does not violate the appropriations clause.[1]
The case was argued before the Supreme Court on October 3, 2023, during the court's October 2023-2024 term.
The case came on a writ of certiorari to the United States Court of Appeals for the 5th Circuit. To review the lower court's opinion, click here.
Why it matters: The court’s decision in the case held that the CFPB’s funding structure was constitutional and that the appropriations clause of the U.S. Constitution was satisfied by Congress’ authorization to allow the CFPB to receive appropriations directly from the Federal Reserve System.
Timeline
The following timeline details key events in this case:
- May 16, 2024: The U.S. Supreme Court reversed and remanded the decision of the United States Court of Appeals for the Fifth Circuit.
- October 3, 2023: The U.S. Supreme Court heard oral argument.
- February 27, 2023: The U.S. Supreme Court agreed to hear the case.
- November 14, 2022: Consumer Financial Protection Bureau and Rohit Chopra appealed to the U.S. Supreme Court.
- October 19, 2022: The United States Court of Appeals for the 5th Circuit reversed the judgment of the United States District Court for the Western District of Texas and rendered judgment in favor of the Community Financial Services Association of America.
Background
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Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited is a case involving the appropriations clause in Article I, Section 9 of the Constitution, the Dodd-Frank Act, and the Consumer Protection Act. The justices were asked to determine whether the funding from the Federal Reserve to the Consumer Financial Protection Bureau (CFPB), violates the Appropriations Clause.[2][3]
The Dodd-Frank Act and the Consumer Protection Act were passed by Congress in response to the 2007 financial crisis. These authorized the creation of the CFPB which receives funding directly from the Federal Reserve, rather than appropriations from Congress.[2][4]
The appropriations clause in Article I, Section 9 of the Constitution requires congressional “Appropriations” for any “Money … drawn from the Treasury.”[5]
The CFPB was sued after issuing a rule that would enforce disciplinary action against payday lenders who attempted to withdraw payments from borrowers' bank accounts after two consecutive attempts due to insufficient funds. A three-judge panel of the United States Court of Appeals for the 5th Circuit rejected the challenge to the rule but held that the CFPB’s funding structure, which flows from the Federal Reserve rather than through congressional appropriations, violates the appropriations clause. [2][4][5][3][6]
Questions presented
The petitioner presented the following questions to the court:
Questions presented:
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Oral argument
Audio
Audio of oral argument:[8]
Transcript
Transcript of oral argument:[9]
Outcome
The court ruled 7-2 that the Consumer Financial Protection Bureau’s funding structure was constitutional and did not violate the appropriations clause. It reversed and remanded the United States Court of Appeals for the Fifth Circuit ruling.
Justice Clarence Thomas delivered the opinion of the court, joined by Chief Justice John Roberts and Justices Sonia Sotomayor, Elena Kagan, Brett Kavanaugh, Amy Coney Barrett, and Ketanji Brown Jackson. Justice Elena Kagan delivered a concurring opinion, joined by Justices Sonia Sotomayor, Brett Kavanaugh, and Amy Coney Barrett. Justice Ketanji Brown Jackson delivered a separate concurring opinion. Justice Samuel Alito delivered a dissenting opinion, joined by Justice Neil Gorsuch.[1]
Opinion
Opinion of the court
Justice Clarence Thomas delivered the opinion of the court, which argued that the funding structure of the Consumer Financial Protection Bureau (CFPB) meets the definition of an appropriation and is appropriately authorized by Congress:[10]
| “ |
The Bureau’s funding statute contains the requisite features of a congressional appropriation. The statute authorizes the Bureau to draw public funds from a particular source—'the combined earnings of the Federal Reserve System,' in an amount not exceeding an inflation-adjusted cap. 12 U. S. C. §§5497(a)(1), (2)(A)–(B). And, it specifies the objects for which the Bureau can use those funds—to 'pay the expenses of the Bureau in carrying out its duties and responsibilities.' §5497(c)(1).
Further, the Bureau’s funding mechanism fits comfortably with the First Congress’ appropriations practice. In design, the Bureau’s authorization to draw an amount that the Director deems reasonably necessary to carry out the agency’s responsibilities, subject to a cap, is similar to the First Congress’ lump-sum appropriations. And, the commission- and fee-based appropriations that supplied the Customs Service and Post Office provided standing authorizations to expend public money in the same way that the Bureau’s funding mechanism does.[10][7] |
” |
Concurring opinions
Justice Elena Kagan delivered a concurring opinion, joined by Justices Sonia Sotomayor, Brett Kavanaugh, and Amy Coney Barrett. She joined the majority opinion in full, but argued that the CFPB’s funding scheme should be considered through a broader historical lens and would have been considered constitutional at any point in U.S. history:[10]
| “ | I would therefore add one more point to the Court’s opinion. As the Court describes, the Appropriations Clause’s text and founding-era history support the constitutionality of the CFPB’s funding. See ante, at 6. And so too does a continuing tradition. Throughout our history, Congress has created a variety of mechanisms to pay for government operations. Some schemes specified amounts to go to designated items; others left greater discretion to the Executive. Some were limited in duration; others were permanent. Some relied on general Treasury moneys; others designated alternative sources of funds. Whether or not the CFPB’s mechanism has an exact replica, its essentials are nothing new. And it was devised more than two centuries into an unbroken congressional practice, beginning at the beginning, of innovation and adaptation in appropriating funds. The way our Government has actually worked, over our entire experience, thus provides another reason to uphold Congress’s decision about how to fund the CFPB.[10][7] | ” |
Justice Ketanji Brown Jackson delivered a separate concurring opinion, arguing that the court should have considered the CFPB’s funding scheme through a narrower lens. Jackson argued that the CFPB’s funding scheme meets the minimum requirements of the appropriations clause and that the court’s opinion did not need to offer more consideration beyond that:[10]
| “ | Indeed, there are good reasons to go no further. When the Constitution’s text does not provide a limit to a coordinate branch’s power, we should not lightly assume that Article III implicitly directs the Judiciary to find one. The Constitution was 'intended to endure for ages to come, and, consequently, to be adapted to the various crises of human affairs.' McCulloch v. Maryland, 4 Wheat. 316, 415 (1819) (emphasis deleted). An essential aspect of the Constitution’s endurance is that it empowers the political branches to address new challenges by enacting new laws and policies—without undue interference by courts. To that end, we have made clear in cases too numerous to count that nothing in the Constitution gives federal courts ' ‘some amorphous general supervision of the operations of government.’ ' Raines v. Byrd, 521 U.S. 811, 829 (1997) (quoting United States v. Richardson, 418 U.S. 166, 192 (1974) (Powell, J., concurring)). Put another way, the principle of separation of powers manifested in the Constitution’s text applies with just as much force to the Judiciary as it does to Congress and the Executive.[10][7] | ” |
Dissenting opinion
Justice Samuel Alito delivered a dissenting opinion, joined by Justice Neil Gorsuch. He argued that the CFPB’s funding structure violates the appropriations clause and that the agency has been granted too much financial autonomy:[10]
| “ | In sum, the CFPB’s unprecedented combination of funding features affords it the very kind of financial independence that the Appropriations Clause was designed to prevent. It is not an exaggeration to say that the CFPB enjoys a degree of financial autonomy that a Stuart king would envy.[10][7] | ” |
Text of the opinion
Read the full opinion here.
Commentary about the case
Pre-decision commentary
Harvard Law School professor Howell Jackson argued in a September 2023 interview about what he perceived to be potential consequences of the case, arguing that "with spending, Congress sometimes tries to be creative and do new things. And that also prompts legal challenges. I think that the CFPB is well grounded in precedent. I had a very, very modest role in kibitzing with the Obama administration when the Dodd-Frank Act and these provisions were put together. And it was not on my radar screen that we were skating close to the edge of the Appropriations Clause with this funding arrangement. It wasn’t something that seemed like a plausible challenge. So, I’m hopeful that the Supreme Court, or at least five members of the Supreme Court, will see it that way as well too."[11]
The Center for American Progress issued a September 2023 report arguing against the Fifth Circuit’s ruling and claiming, "If the 5th Circuit’s decision is upheld, it would effectively defund the CFPB, resulting in the cessation of day-to-day administrative activities necessary to fulfill its statutory mission and could result in hundreds of layoffs of federal employees. This would likely prevent enforcement of the many preexisting statutes mandating consumer financial protections ... which were placed under the CFPB’s purview at its creation. As such, the government would be unable to enforce many of the consumer protections provided under existing laws that long predated the creation of the CFPB."[12]
Steve Forbes, editor-in-chief and chairman of Forbes, wrote in a February 2024 article encouraging SCOTUS to rule against the CFPB's funding structure, "What should be done to liberate the American financial services sector from the CFPB? The proper solution would be to eliminate it, thereby allowing people to retake control of their financial futures. Short of that, we should root for the Supreme Court to end the sweetheart funding mechanism and put the elected members of Congress in charge of the funding of this agency gone rogue."[13]
Congressman Andy Barr (R-Ky.) argued in a statement before the House Financial Services Subcommittee on Financial Institutions and Monetary Policy that the CFPB’s funding structure is unconstitutional and should be subject to the appropriations process, "The Supreme Court has the opportunity to confirm what Republicans have said all along—the CFPB’s unaccountable funding structure is unconstitutional, and the agency must be brought under the appropriations process. … Congress should act now to reassert the power of the purse and ensure unelected bureaucrats do not have the ability to run roughshod over personal rights of consumers and law-abiding businesses," according to The Association of Credit and Collection Professionals International.[14]
Post-decision commentary
The CFPB issued a statement following the ruling supporting the court’s decision, "Today’s decision is a resounding victory for American families and honest businesses alike, ensuring that consumers are protected from predatory corporations and that markets are fair, transparent, and competitive. This ruling upholds the fact that the CFPB’s funding structure is not novel or unusual, but in fact an essential part of the nation’s financial regulatory system, providing stability and continuity for the agencies and the system as a whole. As we have done since our inception, the CFPB will continue carrying out the vital consumer protection work Congress charged us to perform for the American people."[15]
San Francisco City Attorney David Chiu released a statement supporting the Supreme Court ruling, "We have modeled a number of our local consumer protection efforts after CFPB initiatives, which give every individual consumer a voice and recourse against unfair, deceptive, and abusive practices in financial markets. Today’s Supreme Court decision ensures the CFBP is here to stay, and gives broader validation to local, state, and federal consumer protection enforcement actions."[16]
Beth Milito, the executive director of the National Federation of Independent Business’ Small Business Legal Center issued a statement following the ruling arguing, "Small businesses will feel the negative impact of this decision. … We are disappointed with the Court’s ruling, which will ultimately leave small businesses with expensive penalties and burdensome inspections at the hands of the CFPB."[17]
Law professor Stephen L. Carter published an opinion piece in Bloomberg Law against SCOTUS' decision arguing, "The Senate and the House of Representatives, in establishing the agency, chose to go even further than usual in abandoning their work of making policy decisions. Of course we should be worried about this legislative dysfunction. … It’s not at all crazy to imagine, with the CFPB’s funding method having found its way through the storm to constitutional safe harbor, some future Congress deciding that what the nation needs is more agencies with budgets that are beyond legislative control."[18]
Impact
- See also: Consumer Financial Protection Bureau
The decision in Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited ruled that the CFPB’s funding structure satisfies the definition of a congressional appropriation and is therefore constitutional. The decision established that Congress authorizes the agency to draw money directly from the Federal Reserve System to carry out its duties as an agency.
October term 2023-2024
The Supreme Court began hearing cases for the term on October 3, 2023. The court's yearly term begins on the first Monday in October and lasts until the first Monday in October the following year. The court generally releases the majority of its decisions in mid-June.[19]
See also
External links
- Search Google News for this topic
- Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited (petitions, motions, briefs, opinions, and attorneys)
- SCOTUSblog case file for Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited
Footnotes
- ↑ 1.0 1.1 SCOTUSblog, "Consumer Financial Protection Bureau v. Community Financial Services Association of America, Limited," accessed May 16, 2024
- ↑ 2.0 2.1 2.2 SCOTUSblog, "Court will review constitutionality of consumer-watchdog agency’s funding," February 27, 2023
- ↑ 3.0 3.1 SupremeCourt.gov, "CONSUMER FINANCIAL PROTECTION BUREAU, ET AL., PETITIONERS v. COMMUNITY FINANCIAL SERVICES ASSOCIATION OF AMERICA, LIMITED, ET AL. PETITION FOR A WRIT OF CERTIORARI," November 14, 2022
- ↑ 4.0 4.1 SCOTUSblog, "Government appeals decision against Consumer Financial Protection Bureau," November 18, 2022
- ↑ 5.0 5.1 SCOTUSblog, "Another separation-of-powers case, press access to trials, and maritime insurance," February 23, 2023
- ↑ SCOTUSblog, "Community Financial Services Association of America, Limited; Consumer Service Alliance of Texas versus Consumer Financial Protection Bureau; Rohit Chopra," October 19, 2022
- ↑ 7.0 7.1 7.2 7.3 7.4 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
- ↑ Supreme Court of the United States, "Oral Argument - Audio," argued October 3, 2023
- ↑ Supreme Court of the United States, "Oral Argument - Transcript," argued October 3, 2023
- ↑ 10.0 10.1 10.2 10.3 10.4 10.5 10.6 10.7 Justia, "Consumer Financial Protection Bureau v. Community Financial Services Assn. of America, Ltd., 601 U.S. _ (2024)," accessed May 16, 2024
- ↑ Harvard Law Today, "Consumer Financial Protection Bureau on trial," September 29, 2023
- ↑ CAP 20, "CFPB v. CFSA: How the Supreme Court Could Harm Consumers and Financial Markets," September 28, 2023
- ↑ Forbes, "Will The Supreme Court Rein In This Rogue Agency?" February 1, 2024
- ↑ ACA International, "House Subcommittee Chair: 'Rogue' CFPB Needs Guardrails from Congress," April 22, 2024
- ↑ Consumer Financial Protection Bureau, "Statement on Supreme Court Decision in CFPB v. CFSA," May 16, 2024
- ↑ Treasurer & Tax Collector, "Joint Statement by Treasurer Jose Cisneros and City Attorney David Chiu regarding the Supreme Court's decision in CFPB v Community Financial Services Association of America," May 16, 2024
- ↑ NFIB, "Supreme Court Ruling on CFPB Funding Structure Disappoints Small Businesses," May 16, 2024
- ↑ Bloomberg Law, "CFPB Supreme Court Win Is a Loss for Congress: Stephen L. Carter," May 16, 2024
- ↑ SupremeCourt.gov, "The Supreme Court at Work: The Term and Caseload," accessed January 24, 2022
