Democrats and financial industry critics celebrated Wednesday after the Supreme Court rejected an challenge to the Consumer Financial Protection Bureau's (CFPB) funding structure.
“The Supreme Court of the United States follows the law, and the CFPB will remain,” said Sen. Elizabeth Warren (D-Mass.), speaking from the steps of the Supreme Court.
Warren was one of the key architects of the CFPB, which was created through the Dodd-Frank Wall Street Reform Act to enforce consumer protection laws and crack down on predatory lending. Since then, the CFPB said it has recovered $20 billion for consumers.
“When you have an agency that does such a good job of protecting consumers, a lot of banks, a lot of lenders and a lot of Republicans are going to come after it and try to shut it down,” she continued.
Some Republicans have argued that the CFPB's funding structure is unconstitutional since it is not funded directly through the appropriations process. Other banking regulators, including the Federal Reserve, are funded through fees and fines paid by the companies they regulate.
But the Supreme Court voted 7-2 to dismiss a challenge from two lender trade associations, which argued that the CFPB, because it receives its funding from the Federal Reserve, violated Congress' lending authority.
Justices Samuel Alito and Neil Gorsuch were the two dissenting voices. Justice Clarence Thomas wrote the majority opinion that sided with the Biden administration.
“Under the Appropriations Clause, an appropriation is simply a law that authorizes expenditures from a specified source of public funds for specified purposes,” Thomas wrote. “The statute providing for the Agency's funding meets these requirements. We therefore conclude that the Bureau's financing mechanism does not violate the appropriations clause.”
After the decision was made, House Financial Services Committee Chairman Patrick McHenry (R-N.C.) vowed that “Republicans will continue the fight to rein in the rogue CFPB.”
He also called on the House to pass Rep. CFPB Transparency and Accountability Reform Act. Andy Barr (R Ky.), which would, among other things, remove the agency from the Fed system and place it under the appropriations process.
“It is time for the CFPB to be accountable to the American people through its elected representatives,” McHenry said.
The House Financial Services Committee on Wednesday approved a series of bills that include the Clarity in Lending Act limit authority of the agency to label certain actions as abuse.
Rob Nichols, president and CEO of the American Banker's Association, said the powerful lobbying group would “continue to call on Congress to provide greater accountability for the Bureau.”
“Only by putting limits on this rogue regulator can we ensure that consumers are truly protected and that banks can continue to offer them the financial products they want and need,” Nichols said.
But even if bills targeting the CFPB were to pass out of the House, it would be dead on arrival in the Democratic-controlled Senate.
Senate Banking Committee Chairman Sherrod Brown (D-Ohio) called out the “powerful corporate special interests” who have “sought to undermine the agency for more than a decade.”
“Wall Street tried to use the courts to kill the Consumer Financial Protection Bureau, and it failed,” Brown said.
“Today's decision protects workers and consumers who don't have well-paid lobbyists and lawyers fighting for them. We created the CFPB to be their voice, and I will continue to ensure the agency can do its job protecting consumers from Wall Street greed.”
Cassandra Gould, a reverend and senior strategist at Faith in Action, spoke before the Supreme Court alongside Warren, celebrating the decision.
“On behalf of the least of these, those of us at Faith in Action are grateful that young people, the elderly, the vulnerable, people who need more food on the table, will not be suspected of some of the financial predators because the CFPB is intact and can be do work,” Gould said.
Nadine Chabrier, senior policy and litigation attorney at the Center for Responsible Lending, said the decision allows the CFPB to “continue to do its job as a watchdog agency that protects Americans' wallets from predatory financial companies.”
“Even with this decision, we must continue to fight to defend our consumer watchdog in the courts and in Congress as some industry players sue and lobby to perpetuate illegal financial discrimination, billions in illegal junk fees, and other exploitative behavior,” said Chabrier.
President Biden has made tackling junk fees and cracking down on corporate price gouging a priority during his first term. Among other things, he gave the CFPB the authority to approve a rule in March capping late credit card fees for the largest issuers at $8.
Biden also faces a tough re-election race against the presumptive Republican nominee, former President Trump, whose handling of the economy fares better with voters than Biden's.
The president drew a line between himself and the opposing party, rifting 'Republicans in Congress and in states across the country [who] have sided with special interest groups that want to continue robbing families.”
“In the face of years of attacks from extreme Republicans and special interest groups, the Court has made clear that the CFPB's funding authority is constitutional and that its strong record of consumer protection will not be undone.”
