In a landmark decision, the U.S. Supreme Court has ruled that the funding mechanism for the Consumer Financial Protection Bureau (CFPB) is constitutional. This ruling, with a vote of 7-2, fends off a conservative attack on the agency and solidifies its role as a watchdog for consumer protection.
The CFPB was created by Congress in response to the 2008 global financial crisis, with the aim of monitoring and regulating various consumer issues such as mortgages, credit cards, and student loans. However, the agency’s funding structure has been a point of contention, with payday lending groups arguing that it is unconstitutional.
The CFPB currently receives its funding, approximately $600 million a year, from the U.S. Federal Reserve instead of through annual appropriations from Congress. This led to a case being brought before the Supreme Court, after conservative judges on a lower court ruled that the funding mechanism violated the appropriations clause of the U.S. Constitution, which gives the power of the purse to Congress.
However, in a majority opinion written by Justice Clarence Thomas, the Supreme Court disagreed with this ruling. Justice Thomas stated that under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public money for designated purposes. He further stated that the statute providing the bureau’s funding meets these requirements, and therefore does not violate the Appropriations Clause.
This decision was welcomed by President Joe Biden, who called it an “unmistakable win for American consumers.” He also praised the CFPB for its work in protecting consumers from abusive practices by lenders, servicers, and special interests. The President also highlighted the fact that the agency has faced attacks from extreme Republicans and special interests, making this ruling a significant victory for the CFPB and its mission.
The CFPB case was one of three that the Supreme Court heard during its current term, all of which challenged the regulatory authority of federal agencies in areas such as banking, business, industry, and the environment. One of these cases involved a requirement for herring fishermen in New England to provide space onboard their vessels for observers from the National Marine Fisheries Service (NMFS). The other case aimed to curtail the power of the Securities and Exchange Commission (SEC) to adjudicate violations of federal securities laws.
The Supreme Court is expected to issue its rulings in these cases by the end of June. This decision by the conservative-majority court is significant, as it has previously ruled against the government’s key environmental agency’s ability to issue broad limits on greenhouse gases. This ruling could potentially limit the powers of the Biden administration to combat climate change.
Overall, the Supreme Court’s ruling on the CFPB’s funding mechanism is a significant victory for the agency and its mission to protect consumers. It reaffirms the importance of the CFPB’s role in regulating and monitoring consumer issues and sends a strong message that its funding structure is constitutional. This decision also serves as a reminder of the crucial role that federal agencies play in safeguarding the rights and interests of American citizens.
