Conservatives Shut Down by Supreme Court

( – The Supreme Court has rejected a conservative challenge to a federal agency. Last October a court ruled that federal funding of the Consumer Financial Protection Bureau (CFPB) violated the Constitution. However, the Supreme Court has just overturned that decision. 

Agency Funding Is Controversial

After the 2008 financial crisis, the Obama administration created the CFPB to regulate banks and other financial institutions and protect Americans from unfair practices by the financial industry. Until that point, several smaller departments of other agencies, including the Federal Reserve and Federal Trade Commission, had performed the task. The law that created the CFPB, the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act, brought these departments together into a new, separate agency.

Although it claimed to have recovered $19 billion for consumers since its inception, the CFPB isn’t universally popular. It’s faced a string of legal challenges, and many Republican lawmakers would like to see it shut down.

In 2023, a federal appeals court in New Orleans ruled that the CFPB’s funding model violated the Constitution because it shielded the agency from congressional oversight. Most federal agencies are funded through Congress, which grants them an appropriation through the annual federal budget. This model allows Congress to scrutinize agencies’ work and influence how much funding they receive.

However, the CFPB’s budget doesn’t go through that system. Instead, the agency draws its budget directly from the Federal Reserve, currently around $600 million annually. This mechanism has shielded the CFPB from congressional scrutiny. The New Orleans court found it violated the Constitution’s Appropriations Clause.

Last October, the Supreme Court heard arguments from the federal government and attorney Noel Francisco, who represented a group of payday lenders opposed to the CFPB. The Justices then sat on the case for seven months before finally announcing their decision on May 29.

In a surprise move, the conservative-leaning court decided 7-2 to overturn the lower court’s ruling. The majority opinion included solidly conservative justices like Clarence Thomas; the two dissenters included Samuel Alito and Neil Gorsuch. In his dissenting opinion, Alito again raised the issue of the CFPB’s lack of oversight, calling its funding system “novel” and saying the agency could “bankroll its own agenda.” However, the majority opinion, written by Thomas, pointed out that Congress could change the CFPB’s funding model at any time it wanted to do so. Thomas added that the agency’s budget would “fit comfortably” with how the First Congress funded its own activities.

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