The U.S. Supreme Court has ruled the Consumer Financial Protection Bureau is constitutionally funded.
The judges’ 7-2 ruling came in a case filed in 2018 by the Community Financial Services Association of America and Consumer Service Alliance of Texas. Justices Samuel Alito and Neil Gorsuch dissented. The majority opinion, authored May 16 by Justice Clarence Thomas, found Congress did not violate the Appropriations Clause of the Constitution by allowing the bureau to decide how much funding to draw up to a limit.
The Supreme Court found the CFPB’s appropriation of longer than two years is acceptable as other fee-based agencies including the Post Office are also not time-limited. The CFPB’s budget can be a maximum of 12 percent of the total operating expenses of the Federal Reserve.
The CFPB called the Supreme Court ruling “a resounding victory for American families and honest businesses alike, ensuring that consumers are protected from predatory corporations and that markets are fair, transparent and competitive.
“For years, lawbreaking companies and Wall Street lobbyists have been scheming to defund essential consumer protection enforcement,” the bureau 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.”
The Biden administration asked the Supreme Court to review the case after a three-judge panel in the U.S. District Court for the Western District of Texas ruled the funding mechanism violated the Constitution’s Appropriations Clause because it drew funding from the Federal Reserve instead of Congress.
The ruling came after a federal judge last week issued a preliminary injunction against the CFPB’s proposal to cap most credit card late fees at $8. Northern District of Texas Judge Mark Pittman said the injunction was warranted because of the Western District of Texas decision that the CFPB was unconstitutionally funded. Last fall, a federal court granted an injunction against Section 1071 of the Dodd-Frank Act. The injunction was expected to dissolve if the Supreme Court sided with the CFPB.
Following the Supreme Court decision, the American Bankers Association and Independent Community Bankers of America called on Congress to implement more accountability for the bureau. According to the ABA, attention should “shift back to the CFPB’s recent actions and its willingness to flout the law. All too often, the CFPB has exceeded its statutory authority and the will of Congress with significant negative consequences for the consumers the bureau is supposed to protect, and that must come to an end. We will continue to advocate for our members and their customers, including through litigation where necessary.”
ICBA President and CEO Rebeca Romero Rainey said her association and community banks “will continue to strongly support legislation to rein in the CFPB’s excessive regulatory burdens that impede access to credit. … ICBA will continue working through every available channel to mitigate the negative impact of excessively burdensome CFPB rulemakings on community banks and the local communities they serve.”