A Supreme Court ruling last week upheld the constitutionality of the Consumer Financial Protection Bureau (CFPB), overturning a federal appellate court decision.
The Supreme Court’s decision will restart numerous CFPB enforcement actions and legal cases which were placed on hold pending the high court’s ruling.
The CFPB responded to the decision, a bipartisan, 7-2 opinion, saying the decision is a resounding victory for American families and honest businesses.
“This ruling upholds the fact that the CFPB’s funding structure is not novel or unusual, but in fact an essential part of the nation’s financial regulatory system,” the CFPB said, “providing stability and continuity for the agencies and the system as a whole.”
The court case, CFPB v. Community Financial Services Association of America, regarded a challenge to the CFPB’s Payday Lending rule, first issued in 2017. The Fifth Circuit Court of Appeals overturned the federal district court ruling that the CFPB’s funding mechanism was constitutional. The CFPB receives funding directly from the Federal Reserve rather than through annual congressional appropriations.
Justice Clarence Thomas, writing for the majority, concluded, “The statute that authorizes the bureau to draw money from the combined earnings of the Federal Reserve System to carry out its duties satisfies the Appropriations Clause.”
CFPB Director Rohit Chopra said the bureau will move forward swiftly.
“First, the CFPB will be able to forge ahead with our law enforcement work,” he said. “During the pendency of this Supreme Court case, a number of the CFPB’s enforcement actions were put on pause. In many of these lawsuits, we allege that the defendants engaged in severe misconduct that took advantage of people, including ones living paycheck to paycheck and even military families. That means justice has been delayed for too many. The CFPB will continue to focus on repeat offenders, including the individual executives involved in calling the shots. Given our workload, we are increasing the ranks of our enforcement office.”
Second, Chopra said the CFPB will move ahead with efforts to stop the creep of junk fees. Third, he said the bureau will perform more research involving credit scores and credit reports.
“While the payday loan lobby’s case was pending before the Supreme Court, even industry groups sounded the alarm of the consequences if the CFPB’s work was called into question,” Chopra said. “Behind closed doors, financial industry players admit that the CFPB has helped to prevent some of the race-to-the-bottom business practices that helped to foment the subprime mortgage crisis. I hope that more and more of them will also realize that our economy is better off with a CFPB at full strength.”
