The Supreme Court rules that CFPB financing is legal

The The Supreme Court ruled It was announced Thursday that the Consumer Financial Protection Bureau's funding structure is legal.

The court, in a 7-2 decision, rejected an argument that the CFPB's funding method violated the U.S. Constitution because Congress does not annually appropriate money for the agency as it does for other executive entities.

Instead, Congress authorized the CPFB to draw its funding from the Federal Reserve system.

Thursday's ruling protects the CFPB from a possible death sentence, given the risk that Republicans in a bitterly divided Congress could block annual appropriations for the agency.

The decision is a major victory for President Joe Biden, whose administration has used the CFPB to implement key pillars of his economic agenda as he campaigns against former President Donald Trump for a second term.

“The statute authorizing the Bureau to withdraw funds from the combined revenues of the Federal Reserve System to perform its functions satisfies the [Constitution’s] Appropriations Clause,” Justice Clarence Thomas, a conservative, wrote in the majority opinion.

“While there may be other constitutional checks on Congress's power to establish and fund an administrative agency, specifying the source and purpose is the only check the Appropriations Clause requires,” Thomas wrote.

He was joined at the ruling by three other conservatives, Chief Justice John Roberts and Justices Brett Kavanaugh and Amy Coney Barrett, and the court's three liberal justices, Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson.

The court's two remaining conservative justices, Samuel Alito and Neil Gorsuch, disagreed.

Alito grumbled in a written dissent that the majority is “retaining a new statutory scheme” that would allow the CFPB to “fund its own agenda without any congressional control or oversight.”

“In short, there is apparently nothing wrong with a law that gives the executive the power to withdraw as much money as it wants from any identified source for any authorized purpose until the end of time,” wrote Alito.

The majority decision reversed a 2022 ruling by the 5th Circuit US Court of Appeals that found the CFPB's funding mechanism unconstitutional.

A spokesperson for the CFPB said in a statement that the Supreme Court's decision “is a resounding victory for both American families and honest businesses, ensuring that consumers are protected from predatory companies and that markets are fair, transparent and competitive.”

“The Court rejected the arguments of the payday lending lobby and made clear that the CFPB is here to stay,” the spokesperson said.

The CFPB was created by Congress in the wake of the 2008 financial crisis to enforce consumer protection laws and ensure a fair marketplace for consumer financial products and services.

The funding structure was designed to protect it from political pressure by not relying on an annual appropriation from Congress.

Two trade groups representing lenders, the Community Financial Services Association of America and the Consumer Service Alliance of Texas, had challenged the CFPB's financing structure in the case before the Supreme Court.

The agency has been at the center of several high-profile political fights during the Biden administration over its regulatory plans, including an effort to protect Americans from late credit card payment fees.

The CFPB's rule capping these late fees at $8 The law was set to take effect on Tuesday, but a federal judge in Texas suspended it last week.

Senate Banking Committee Chairman Sherrod Brown, D-Ohio, celebrated the court's ruling.

“Wall Street tried to use the courts to kill the Consumer Financial Protection Bureau, but it failed,” Brown said.

“Powerful corporate special interests know the CFPB is against them, which is why they have been trying to undermine the agency for more than a decade. Today's decision protects workers and consumers who don't have well-paid lobbyists and lawyers to fight their battles. for them,” Brown said.

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