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.
The CFPB was created after the 2008 financial crisis to regulate mortgages, auto loans and other consumer finance. The case was brought by payday lenders opposing a Bureau rule.
The CFPB case is among several major challenges for federal regulatory agencies on the docket this term for a court that has been open to limits on its operations for more than a decade. The CFPB, the brainchild of Democratic Senator Elizabeth Warren of Massachusetts, has long been opposed by Republicans and their funders.
Unlike most federal agencies, the consumer bureau is not dependent on the annual budget process in Congress. Instead, it is funded directly by the Federal Reserve, with a current annual cap of about $600 million.
The federal appeals court in New Orleans, in a new ruling, found that the funding violated the Constitution’s appropriations clause because it improperly protects the CFPB from congressional oversight.
Judge Clarence Thomas in its majority opinion, it went back to the early days of the Constitution to note that “the Bureau’s financing mechanism fits comfortably with the appropriations practice of the First Congress.”
Justices Samuel Alito and Neil Gorsuch, Thomas’s colleagues on the court’s conservative bloc, dissented. “The Court upholds a new legal regime under which the powerful Consumer Financial Protection Bureau (CFPB) can finance its own agenda without any control or oversight from Congress,” Alito wrote.
The case was argued more than seven months ago, during the first week of the court’s term. Lofty decisions like Thursday’s 7-2 vote typically don’t take that long, but Alito’s dissent was longer than the majority opinion, and two other justices, Elena Kagan and Ketanji Brown Jackson, wrote separate opinions, although both were part of the majority. .
While the U.S. Chamber of Commerce and some other business interests have supported payday lenders, mortgage bankers and other industries regulated by the CFPB have warned the court to avoid a broad ruling that could disrupt markets.
In 2020, the court decided another CFPB case, ruling that Congress improperly insulated the agency head from removal. The judges said the director could be replaced by the president at will, but allowed the agency to continue operating.
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