by Nowell D. Bamberger, Elsbeth Bennett, and Andrew Khanarian
From left to right: Nowell D. Bamberger, Elsbeth Bennett and Andrew Khanarian. (Photos courtesy of Cleary Gottlieb Steen & Hamilton LLP)
The Supreme Court recently upheld the Consumer Financial Protection Bureau’s funding structure in a 7–2 decision that will likely pave the way for renewed regulatory activity by the agency in the near future.
Enacted as part of the Dodd-Frank Act, the CFPB’s unique funding structure permits the agency to annually request an unspecified portion of funds from the Federal Reserve System, subject to an inflation-adjusted cap. In rejecting a constitutional challenge to this funding structure by several trade associations, the Supreme Court held in Consumer Financial Protection Bureau v. Community Financial Services Association of America that the Appropriations Clause merely requires Congress to identify the source and purpose of federal funds, and that Congress’s one-time appropriation for the CFPB in the Dodd-Frank Act meets that minimal constitutional standard. The seven-member majority largely aligned in their reasoning that the Constitution’s text and history, as well as early congressional practice, endorsed funding mechanisms such as this one, and thus provided broad legal support for the fiscal independence of agencies that are delegated substantial powers. As a practical matter, this decision will likely jumpstart long-delayed regulatory and enforcement work at the CFPB, including the vacated payday lending rules that were the subject of this litigation.