The Supreme Court on Thursday rejected a conservative-led attack that could have undermined the Consumer Financial Protection Bureau. The justices ruled 7-2 that the way the CFPB is funded does not violate the Constitution, reversing a lower court and drawing praises from consumers. Justice Clarence Thomas wrote the majority opinion, splitting with his frequent allies, Justices Samuel Alito and Neil Gorsuch, who dissented.
Quick Read
- Supreme Court Ruling: The Supreme Court upheld the funding mechanism of the Consumer Financial Protection Bureau (CFPB), rejecting a conservative challenge that argued it was unconstitutional. The Court ruled 7-2 in favor of the CFPB.
- Majority Opinion: Justice Clarence Thomas wrote the majority opinion, emphasizing that the CFPB’s funding through the Federal Reserve, rather than the annual congressional budget process, aligns with historical appropriations practices.
- Dissenting Opinion: Justices Samuel Alito and Neil Gorsuch dissented, arguing that the funding mechanism allows the CFPB to operate without sufficient congressional oversight, which they believe is constitutionally required.
- Background of the Case: The challenge was brought by payday lenders who were opposed to a CFPB rule limiting their ability to withdraw funds from borrowers’ accounts. They claimed the CFPB’s funding structure violated the Constitution’s appropriations clause.
- Impact of the Decision: The ruling ensures that the CFPB can continue to operate independently from annual congressional funding, maintaining its capacity to regulate consumer finance as intended since its establishment post-2008 financial crisis.
- Public and Political Reaction: Consumer advocacy groups have applauded the decision, viewing it as a victory for consumer protection. Conversely, some business interests, particularly those in sectors regulated by the CFPB, had supported the challenge, expressing concerns about the agency’s independence.
The Associated Press has the story:
SCOUT sides with Consumer Financial Protection Bureau, spurning a conservative attack
Newslooks- WASHINGTON (AP) —
The Supreme Court on Thursday rejected a conservative-led attack that could have undermined the Consumer Financial Protection Bureau.
The justices ruled 7-2 that the way the CFPB is funded does not violate the Constitution, reversing a lower court and drawing praises from consumers. Justice Clarence Thomas wrote the majority opinion, splitting with his frequent allies, Justices Samuel Alito and Neil Gorsuch, who dissented.
The CFPB was created after the 2008 financial crisis to regulate mortgages, car loans and other consumer finance. The case was brought by payday lenders who object to a bureau rule that limits their ability to withdraw funds directly from borrowers’ bank accounts. It’s among several major challenges to federal regulatory agencies on the docket this term for a court that has for more than a decade been open to limits on their operations.
The CFPB, the brainchild of Democratic Sen. Elizabeth Warren of Massachusetts, has long been opposed by Republicans and their financial backers. The bureau says it has returned $19 billion to consumers since its creation.
Unlike most federal agencies, the consumer bureau does not rely on the annual budget process in Congress. Instead, it is funded directly by the Federal Reserve, with a current annual limit of around $600 million.
The federal appeals court in New Orleans, in a novel ruling, held that the funding violated the Constitution’s appropriations clause because it improperly shields the CFPB from congressional supervision.
Thomas reached back to the earliest days of the Constitution in his majority opinion to note that “the Bureau’s funding mechanism fits comfortably with the First Congress’ appropriations practice.”
In dissent, Alito wrote, “The Court upholds a novel statutory scheme under which the powerful Consumer Financial Protection Bureau (CFPB) may bankroll its own agenda without any congressional control or oversight.”
The CFPB case was argued more than seven months ago, during the first week of the court’s term. Lopsided decisions like Thursday’s 7-2 vote typically don’t take so long, but Alito’s dissent was longer than the majority opinion, and two other justices, Elena Kagan and Ketanji Brown Jackson, wrote separate opinions even though they both were part of the majority.
Consumer groups cheered the decision, as did a bureau spokesman.
“For years, lawbreaking companies and Wall Street lobbyists have been scheming to defund essential consumer protection enforcement,” bureau spokesman Sam Goldford said in a statement. “The Supreme Court has rejected their radical theory that would have devastated the American financial markets. The Court repudiated the arguments of the payday loan lobby and made it clear that the CFPB is here to stay.”
Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition, said the decision upholding the consumer bureau’s funding structure would have positive effects across the U.S. economy.
“It’s always nice to see the courts get something right — especially in this tawdry circumstance where payday loan predators sought to wriggle out of basic oversight using absurd distortions of law and fact,” Van Tol said in a statement.
While the U.S. Chamber of Commerce and some other business interests backed the payday lenders, mortgage bankers and other sectors regulated by the CFPB cautioned the court to avoid a broad ruling that could unsettle the markets.
In 2020, the court decided another CFPB case, ruling that Congress had improperly insulated the head of the bureau from removal. The justices said the director could be replaced by the president at will but allowed the bureau to continue to operate.
