The CFPB Is Funded Without an Annual Vote of Congress, and That Should Worry Us

Every federal employee knows the most frightening day of the year. It is the day the appropriations bill comes up, when a committee that controls your budget asks you what you did with last year's money and what you plan to do with next year's. It is a hard day, and it is supposed to be.

Now picture an agency that never has that day. Its budget is not voted on. It sends a request to a different agency, which sends the money, and the committees that ordinarily oversee spending are barred by statute from reviewing it. If that sounds like a satirist's invention, it is not. It is the funding design of the Consumer Financial Protection Bureau. Whatever you think of what the Bureau does, the way it is paid raises a constitutional and practical question that deserves a straight answer: who holds the purse?

The claim, stated up front

Here is the thesis, so you know where the argument is going. The Supreme Court held in 2024 that the CFPB's funding mechanism is constitutional, and that holding is the law. I accept it. But a constitutional holding and a sound design are different things. The Court answered the narrow question of whether the Appropriations Clause permits the arrangement. It did not say the arrangement is wise, and it did not say Congress should keep it. My argument is that Congress should end it, because the power of the purse is the strongest check the legislature has, and an agency that escapes the check escapes accountability.

What the Constitution says about money

Start with the text. Article I, Section 9, Clause 7 reads:

No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.

Two requirements sit in that sentence. Money leaves the Treasury only under a law Congress passed, and the government must publish an account of what it takes in and spends. The post on No Money Shall Be Drawn but by Appropriation, Congress's Power of the Purse reads the clause in detail.

The Founders cared a great deal about who controls the money, and they had a history behind them. The English Parliament won its liberties from the Crown in large part by controlling the Crown's finances. A king who must ask for money must listen. Madison spelled this out in Federalist 58, in a passage that deserves to be read aloud:

This power over the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure.

The most complete and effectual weapon. Not one of several. Madison gave the House, which is closest to the voters, the power to originate revenue bills and to control spending, because he understood that a legislature that cannot withhold money cannot restrain anyone. This is the logic behind the tools described in None of the Funds, How Appropriations Riders Let Congress Say No to an Agency, where Congress writes limits into the spending laws, and the logic of the rule that spending needs a law.

How the CFPB is funded

Now the design. Congress created the Consumer Financial Protection Bureau in Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed on July 21, 2010. The funding provision is Section 1017, codified at 12 U.S.C. § 5497. It says the Federal Reserve Board of Governors shall transfer to the Bureau, from the combined earnings of the Federal Reserve System, the amount the Director determines is reasonably necessary to carry out the Bureau's duties.

There is a cap, and the cap is not a dollar figure. It is a percentage of the Federal Reserve System's total operating expenses: 10 percent for fiscal year 2011, 11 percent for 2012, and 12 percent for 2013 and the years after, the figure in force when the Court ruled. Congress cut that last percentage to 6.5 percent in 2025 (Public Law 119-21), which shows the cap is something Congress can change. Within that ceiling the Director decides how much to request. The statute also says that the funds the Bureau receives are not subject to review by the House and Senate Committees on Appropriations.

Think through what that means in practice. Most agencies are funded in one of three ways. They receive annual appropriations, which Congress votes each year. They collect fees from the businesses they oversee, in an amount Congress sets. Or they receive standing funds that Congress established by law and may amend. The CFPB's version is unusual. Its money comes from the earnings of another institution, in an amount its own head sets, up to a ceiling tied to the other institution's expenses, with no annual committee review.

Notice what the ceiling is tied to. It is tied to the Federal Reserve's operating expenses in a base year, 2009, adjusted each year by a price index. That number has nothing to do with how much consumer finance regulation costs or how much work there is to do, and it rises automatically with the index. A budget cap pegged to another institution's old expenses is not much of a cap.

The long road to the Court

The design was challenged almost from the start, but the serious case came from a payday lending rule. In 2017 the Bureau issued a rule requiring payday lenders to determine that a borrower can repay a loan before making it. Trade groups challenged it, and in October 2022 the Fifth Circuit held that the Bureau's funding mechanism violated the Appropriations Clause, reasoning that it took away Congress's power over the purse and was unlike any other agency's funding. The Supreme Court took the case.

On May 16, 2024, in Consumer Financial Protection Bureau v. Community Financial Services Association of America, the Court reversed, by a vote of 7-2. Justice Thomas wrote for the Court. He reasoned that an appropriation, as the Constitution uses the word, is simply a law that authorizes the expenditure of public funds for designated purposes, and that Dodd-Frank is such a law. It identifies a source of funds, the Fed's earnings, and it identifies purposes, the Bureau's statutory duties. Nothing in the Appropriations Clause, the Court said, requires that an appropriation be annual, that it specify a fixed sum, or that it come from the general Treasury. The majority pointed to a long history of early Congresses making appropriations in ways that did not follow an annual routine. It also noted that other financial regulators, such as the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, are funded without annual appropriations, and that the Federal Reserve itself is.

Justice Kagan, joined by Justices Sotomayor, Kavanaugh and Barrett, concurred, stressing that the historical record supports the result. Justice Jackson concurred separately. Justice Alito, joined by Justice Gorsuch, dissented. He argued that the Bureau's funding combines two kinds of insulation that, together, have no parallel: it is funded outside the appropriations process, and the money comes from an institution that is itself outside the appropriations process. In his view, that combination leaves Congress without the control over spending the Clause was meant to secure.

The steelman: the case for the design

The fair statement of the other side goes like this.

One: Congress chose this design on purpose and for good reasons. A consumer regulator that must beg Congress each year for money can be starved by the industry it oversees, through lobbying and through spending riders. Independence in funding makes independence in enforcement possible.

Two: The Constitution does not require any particular appropriations method. Congress has used permanent and self-executing funding from the beginning, and it is Congress that wrote the statute and can change it.

Three: Other agencies, including the bank regulators, are funded outside annual appropriations, and nobody called that unconstitutional.

Four: Congress retains every power. It can amend the statute tomorrow, cut the percentage, repeal the Bureau or conduct oversight through other means, including hearings and the Government Accountability Office.

Those points explain why the Court ruled as it did. Point three is partly right and partly misleading. The bank regulators fund themselves from fees assessed on the banks they supervise, which ties their budgets to the size of the industry they police. The CFPB takes money from the Federal Reserve, which means it is not funded by the industry it regulates and is not funded by Congress, and it answers to neither in the usual way.

The rebuttal: why a legal holding is not a good design

Here is the argument, in numbered premises.

One: the power of the purse is the legislature's routine check. Federalist 58 calls it the most effectual weapon. It works because it is exercised regularly. An annual vote is the occasion on which a committee can ask a hard question, attach a condition, demand a report or change a priority. Remove the vote and the weapon sits in a case on the wall.

Two: an agency that sets its own budget has the strongest possible incentive to grow. Any institution that can decide how much it needs, within a ceiling that rises on its own, will find the need. This is not a charge against any person. It is a statement about incentives, and Madison's whole approach to government was to design for incentives rather than for the good intentions of whoever happens to hold office.

Three: oversight is not the same as control. The post-hoc tools Congress retains, hearings, letters and the power to amend the law, depend on Congress finding the time, the votes and the will. Appropriations do not require any of that. They happen every year, and the default is that the agency needs permission. Under the CFPB's design the default is reversed: the agency needs permission to stop.

Four: the design strips accountability from both elected branches. The Director was, at the time of Dodd-Frank, a single official removable only for cause, a feature the Court struck down in Seila Law in 2020 and that the post on Humphrey's Executor Created a Fourth Branch the Constitution Never Mentions discusses. The funding, meanwhile, comes from a source outside the Treasury and outside the appropriations committees. An agency that neither the President nor the House can fully control is a creature of the statute alone, and statutes are hard to amend.

Five: the Court's holding left the policy question to Congress. That is where it belongs. When the Court says a design is constitutional, it is saying that the voters may choose it. It is not saying that the voters should.

The practical stakes for a family

It may seem remote. It isn't. The Bureau writes rules about mortgages, credit cards, student loans, auto loans and bank accounts, and its decisions shape what a family may borrow and at what price. A reader may like some of those rules and dislike others. That is the nature of politics. The point is that the people who live under the rules should have a way to affect how much power the agency has, and the way the Constitution provides is through the budget.

Consider the alternative in a different setting, labelled as a hypothetical. Suppose Congress told the Department of Transportation that its budget would be set by the Department itself, drawn from another agency's surplus, and that the House and Senate committees could not review it. Voters of every party would see the problem. They would ask who is in charge. The only reason the CFPB feels different is that its subject is popular with some and its defenders are organized.

Fixes that respect the Court's ruling

The Court's decision does not stop Congress from changing the law. Several reforms are open.

• Put the Bureau on annual appropriations. This is the plainest fix. The Bureau would submit a budget, the committees would review it and Congress would vote.
• Keep the Fed as a source but require a vote. Congress could keep the Fed's earnings as the source of funds and still require that each year's amount be appropriated.
• Set a dollar cap in the statute. Replace the percentage of the Fed's expenses with a fixed amount, adjusted by Congress.
• Add a sunset. Require reauthorization every few years, so that the whole design returns to the floor on a schedule.
• Require the Bureau to be audited and its reports published. This follows the Constitution's own demand for "a regular Statement and Account."

Each of these preserves the Bureau's work while restoring the check. A conservative who believes in consumer protection through clear law, and not through a self-funded regulator, should find at least one of them acceptable. The same instinct for returning decisions to Congress runs through The Nondelegation Doctrine Says Congress Cannot Hand Its Job to Someone Else and Conservatives Are Not Against Government, We Are Against Rule by Bureau.

What the Founders would ask

Ask the Founders about a budget, and the questions are short. Who voted for it? When? Who can cut it? If the answers are "no one in particular," "once, in 2010" and "only by passing a new law over the agency's objections," they would recognize the arrangement as a version of the thing they fought a war to end. The legislature's control of the purse was not an accident of the Constitution. It was the point of it. You can read the clause yourself on the Constitution page, and the wider study of congressional tools is at the oversight page.

A note on fairness. Congress wrote this law, and a Congress can unwrite it, which is the right answer to the objection that the Court's ruling closed the door. It didn't. It left the door where it always was, in the hands of the voters and their representatives.

The case in brief

1. The Appropriations Clause of Article I, Section 9 says no money leaves the Treasury but by appropriations made by law, and Federalist 58 calls the purse the most complete and effectual weapon of the people's representatives.
2. Dodd-Frank of July 21, 2010 funds the CFPB by transfers from the Federal Reserve, up to a percentage of the Fed's operating expenses, with no review by the appropriations committees.
3. In CFPB v. Community Financial Services Association (May 16, 2024) the Court held 7-2 that the design satisfies the Appropriations Clause, a holding about constitutionality and not about wisdom.
4. The design weakens the annual check, gives the agency a ceiling tied to an unrelated institution's expenses, and leaves oversight to Congress's occasional attention.
5. Congress can fix it by moving the Bureau to annual appropriations, setting a fixed cap, or adding a sunset, and should.

What you can do: look up the Bureau's most recent annual financial report on its own website, read how much it requested from the Federal Reserve, and send your representative a note asking whether that amount should be voted on each year.