The Consumer Finance Protection Bureau Is Constitutional, After All

In a blow to the conservative legal movement, the U.S. Supreme Court ruled that the Consumer Finance Protection Bureau is not, in fact, an unconstitutional abomination.

The independent agency — which oversees payday lenders, credit card companies, and student loans — has long been a partisan target. And as it turns out, its funding mechanism is perfectly constitutional, the court ruled Thursday in a 7-2 decision. 

Its conclusion was straightforward: When it created the CFPB, Congress passed a law that authorized expenditures from specific sources to fund the agency. This satisfies the Appropriations Clause of the Constitution, the court ruled.

The attack on the CFPB is not the only challenge brought this term by conservative opponents of modern regulatory agencies. In as-yet-undecided cases, the Supreme Court will consider whether to curtail the powers of the Securities Exchange Commission and whether to gut a landmark standard for all regulatory oversight. Challenges to the National Labor Relations Board are working their way through lower courts. 

In all three cases before the Supreme Court this term, legions of conservative legal luminaries urged the justices to shrink the administrative state. In the CFPB challenge, however, they lost even Justice Clarence Thomas, who wrote the majority opinion, plus three others from the Court’s conservative supermajority. Only Justices Samuel Alito and Neil Gorsuch dissented.

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As The Intercept reported last year, the case was brought and bankrolled by payday lenders, who asserted the way the CFBP is funded is unconstitutional. If so, every regulation the CFPB ever issued was potentially invalid — including rules issued in 2017 for high-interest loans, which irked payday lenders. 

Congress designed the CFPB in response to the 2008 financial crisis, engineering it to be shielded from certain political winds via provisions insulating its funding and leadership in ways that differ from most federal departments. Four years ago, in a sign that the Roberts Court was eager to hear these kinds of broad challenges, the Supreme Court invalidated provisions regarding CFPB’s leadership structure but left it otherwise intact.

The latest attempt to finish off the CFPB came with impeccable conservative provenance. In 2022, a panel of the Fifth U.S. Circuit Court of Appeals — all appointed by former President Donald Trump — ruled that CFPB’s funding mechanism was unconstitutional. 

Before the Supreme Court, former solicitor general Noel Francisco, who clerked for late Justice Antonin Scalia and notoriously refused to defend the CFPB during his tenure in the Trump administration, argued for the payday lenders. A slew of friend-of-court briefs urged the court to sink the CFPB or at least cut off its funding, including conservative stalwarts like the U.S. Chamber of Commerce, New Civil Liberties Alliance, a coalition of Republican attorneys general, and the omnipresent John Eastman.

In a rebuff, the Supreme Court majority rejected these arguments, concluding its funding model was indeed constitutional. 

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What divided the justices — even within the majority — was one of the central disagreements ushered in by Scalia and his fellow originalist revolutionaries on the bench: When the government faces thoroughly modern issues like regulating credit card penalties and semiautomatic weapons, should ancient history matter? 

Justice Thomas, an arch-originalist, went as far back as the Middle Ages, the Magna Carta, and the Glorious Revolution. His opinion, which was signed by the full majority, dwelled on how the First Congress allocated money to agencies, and barely peeked past 1800. 

In a concurring opinion, Justice Elena Kagan pointed out that there are a couple more centuries to consider. “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,” Kagan wrote. Justice Sonia Sotomayor co-signed that view, along with conservative Justices Amy Coney Barrett and Brett Kavanaugh.

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Justice Ketanji Brown Jackson, meanwhile, writing only for herself, suggested that sometimes ancient history has limited lessons for 21st-century issues like financial regulation. “In response to the devastation wrought by the 2008 financial crisis, Congress passed and the President signed the Dodd-Frank Wall Street Reform and Consumer Protection Act,” she wrote, noting that the payday lenders challenging CFPB were “exactly the type of entity the Bureau’s progenitors sought to regulate and whose influence Congress may have feared.”

“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,” Jackson wrote.

In dissent, Justices Alito and Gorsuch howled that the “Framers would be shocked, even horrified” by the CFPB. Alito’s dissent cited Montesquieu, the practices of “the early Stuart kings” in the 1600s, and the accounting methods of Alexander Hamilton, and threw in a gratuitous shoutout to an infamous 17th-century witch trial judge, Sir Matthew Hale, who birthed the legal notion that husbands cannot be prosecuted for raping their wives, which continues to haunt legal systems worldwide. 

Alito concluded: “Today’s decision is not faithful to the original understanding of the Appropriations Clause and the centuries of history that gave birth to the appropriations requirement, and I therefore respectfully dissent.” 

The Court is expected to issue its remaining decisions regarding regulatory agencies’ authority and structure by July. 

Sen. Elizabeth Warren, D-Mass., who proposed establishing the CFPB as a law professor, praised the ruling but looked ahead to future challenges. 

“This isn’t the last attack on the CFPB we’ll see from Wall Street, the banks & their Republican allies,” Warren tweeted.