Consumer Financial Protection Bureau v. Community Financial Services Assn. of America, Ltd.

Background

Trade associations that represent payday lenders and credit-access businesses sued after the consumer finance agency issued a rule restricting high-interest loans. The challengers argued the agency's funding — which lets it draw money from the Federal Reserve System each year instead of seeking annual congressional appropriations — violated the Constitution’s rule that public spending must be authorized by law. A federal appeals court agreed and struck down the funding method; the Supreme Court reviewed that narrow question.

Reasoning

The Court framed the question in plain terms: what makes a valid appropriation? It held that an appropriation is a law that identifies a source of public funds and authorizes spending for specified purposes. The Dodd-Frank law authorizes the agency to draw from the Federal Reserve’s combined earnings up to a statutory, inflation-adjusted cap and to use the money to pay the agency’s expenses. Looking to historical practice around the founding and early congressional practice, the Court concluded that this source-and-purpose test meets the constitutional requirement and therefore the funding method is lawful.

Real world impact

Because the Court upheld the funding structure, the agency may continue drawing money each year from Federal Reserve earnings within the statutory cap and may retain and invest unused funds. That outcome preserves the agency’s current operating independence from annual appropriations and removes the challengers’ constitutional basis for voiding the funding. The decision reverses the appeals court and sends the case back for further proceedings about the underlying rule if needed.

Dissents or concurrances

Concurring opinions stressed historical practice and separation of powers; a dissent warned this ruling weakens Congress’s power over the purse and would have upheld the appeals court.