Supreme Court Issues Long-Awaited CFPB Ruling, Rejecting Challenge and Affirming Constitutionality of Funding Mechanism

May 16, 2024Federal Regulation, Litigation, News

Earlier today, the Supreme Court handed down its 7-2 decision in Consumer Financial Protection Bureau v. Community Financial Services of America, a landmark case in which opponents challenged the CFPB’s funding mechanism as unconstitutional.

Because the CFPB is funded by the Federal Reserve by an amount determined by the Bureau, opponents argued that its funding mechanism violated the Constitution’s Appropriations Clause, which states that “no money shall be drawn from the Treasury, but in consequence of appropriations made by law. This clause, opponents said, meant that the Bureau’s funding mechanism insulated it from accountability because Congress could not exercise authority over it using its funding and appropriations powers.

Democrats in Congress were quick to praise the Court’s ruling while Republicans were similarly quick to criticize it.

“Wall Street tried to use the courts to kill the Consumer Financial Protection Bureau, and they failed,” said Senate Banking Committee Chairman Sherrod Brown (D-Ohio). “Powerful corporate special interests know the CFPB stands up to them, which is why they have been trying to gut the agency for over a decade. Today’s decision protects workers and consumers who don’t have high-paid lobbyists and lawyers to fight their battles for them. We created the CFPB to be their voice, and I will continue to ensure the agency is able to do its job protecting consumers from Wall Street greed.”

“I am pleased that the efforts to gut the CFPB’s funding have failed,” said House Financial Services Committee Ranking Members Maxine Waters (D-Calif.). “While we have certainly not seen the end of attacks against the CFPB, consumers should rest assured that Democrats will continue the fight to make sure that the extreme MAGA agenda doesn’t unravel the historic efforts led by the CFPB to protect consumers from unfair, deceptive, and abusive acts and practices.”

“Despite the setback from today’s ruling, Republicans will continue the fight to rein in the rogue CFPB,” said House Financial Services Chairman Patrick McHenry (R-N.C.). “To be clear, this Supreme Court opinion yet again emphasizes that Congress has exclusive authority and discretion over federal agencies’ funding structures. The House must urgently take up Congressman Andy Barr’s CFPB Transparency and Accountability Reform Act. This commonsense legislation will fix the mistakes of Dodd-Frank which set the dangerous precedent of tapping the central bank to fund partisan political objectives. It’s past time the CFPB is held accountable to the American people through their elected representatives.”

And Senate Banking Committee Ranking Member Tim Scott (R-S.C.) said, “The Consumer Financial Protection Bureau lacks important accountability to Congress and the American people, and under Director Chopra, the agency routinely and brazenly acts outside of the scope of its authority – regulating through blog posts and enforcement actions. While today’s ruling is disappointing, I will continue to work to hold the Bureau accountable and push back on its abuse of power driven by politics instead of policy.”

The full opinion is available here.

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