Congress has broad powers to delegate its spending power to federal agencies, the Supreme Court ruled Thursday, upholding the power of the Consumer Financial Protection Bureau to set its own budget without having to ask Capitol Hill for money each year.
The decision is a victory for Sen. Elizabeth Warren, who championed the CFPB in the wake of the 2008 Great Recession as an independent check on Wall Street and big banks. The agency’s ability to set its own budget was critical to that independence, leaving outside the usual give and take of the annual spending process.
Opponents had argued that structure violated Congress’ power of the purse, one of its core duties under the Constitution. But the justices said in a 7-2 ruling that if Congress wants to lend that power to federal agencies, it can do so.
Justice Clarence Thomas, writing for the majority, said all the Constitution requires is that Congress authorize an “appropriation,” or expense. It doesn’t dictate how, or how often, it must do so.
“Based on the Constitution’s text, the history against which that text was enacted, and congressional practice immediately following ratification, we conclude that appropriations need only identify a source of public funds and authorize the expenditure of those funds for designated purposes to satisfy the Appropriations Clause,” Justice Thomas wrote.
He pointed historically to the U.S. Post Office, which did not have annual appropriations.
Justice Samuel A. Alito Jr. dissented, saying the Constitution was intended to keep the different branches in their lanes and spending is Congress’s territory.
“The Framers would be shocked, even horrified, by this scheme,” Justice Alito wrote in an opinion joined by Justice Neil M. Gorsuch.
He said the effect is to insulate the CFPB from Congress’ direct oversight, leaving the board free to pursue policies such as a recent warning to banks not to deny credit to illegal immigrants because of their unlawful presence, and a proposal to delete medical bills from Americans’ credit reports.
All sides acknowledged the CFPB’s funding is “novel,” though Justice Thomas said it wasn’t too far afield from what early Congresses did in funding the customs service through collected fees.
In the case of the CFPB, it gets its money from the Federal Reserve.
Ms. Warren, then a Harvard University law professor, pushed the idea of a consumer bureau after the 2008 Wall Street crash, saying the political branches of government were either too captured by donors or too asleep to act.
The CFPB was created with a single director who was insulated from firing except in egregious circumstances, protecting the person from a president’s ire, and who is able to set the agency’s budget, protecting the bureau from direct Congressional meddling.
The Supreme Court in 2020 ruled the firing restrictions unconstitutional but left the bulk of the bureau intact.
Opponents had hoped to use the funding issue as a deeper strike at the CFPB.
The Community Financial Services Association of America and the Consumer Service Alliance of Texas challenged CFPB’s Payday Lending Rule, which restricted lenders’ ability to provide consumers with overly burdensome loans and restricted lenders’ access to borrowers’ accounts to demand repayment.
The groups won their case before the 5th U.S. Circuit Court of Appeals last year, with the judges ruling that Congress illegally surrendered its power to appropriate funds to the bureau.
That court said the payday rule must be vacated because it can be traced back to the CFPB’s unconstitutional funding structure.
Other federal appeals courts, though, have upheld the CFPB’s arrangement. Those courts noted that other federal agencies, such as the Federal Reserve and the Federal Housing Finance Agency, also have budget autonomy.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.
• Alex Swoyer can be reached at aswoyer@washingtontimes.com.