WASHINGTON — 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, overturning a lower court ruling.
The CFPB was created after the 2008 financial crisis to regulate mortgages, auto loans and other consumer financing. The case was brought by lenders who objected to an agency rule.
The CFPB case is one of several major challenges for federal regulators scheduled this term before a court that has been receptive to restrictions on their activities for more than a decade. The CFPB, the brainchild of Democratic Senator Elizabeth Warren of Massachusetts, has long been opposed by Republicans and their backers.
Unlike most federal agencies, the Consumer Bureau does not rely on the annual budget process in Congress. Instead, it is funded directly by the Federal Reserve, with a current annual limit of about $600 million.
The federal appeals court in New Orleans ruled in a new ruling that the funding violated the Constitution's appropriations clause because it improperly protects the CFPB from congressional oversight.
Justice Clarence Thomas, in his majority opinion, harked back to the earliest days of the Constitution, noting that “the Bureau's funding mechanism easily aligns with the appropriations practice of the First Congress.”
Justices Samuel Alito and Neil Gorsuch, Thomas' colleagues on the court's conservative bloc, dissented. “The Court upholds a new legal system that allows the powerful Consumer Financial Protection Bureau (CFPB) to fund its own agenda without any congressional check or oversight,” Alito wrote.
The case was argued more than seven months ago, during the first week of the court's term. Skewed decisions like Thursday's 7-2 vote typically don't last that long, but Alito's dissent lasted longer than the majority opinion, and two other justices, Elena Kagan and Ketanji Brown Jackson, wrote separate opinions even though they were both part of the majority. .
While the U.S. Chamber of Commerce and some other business interests supported the payday lenders, mortgage bankers and other CFPB-regulated industries warned the court to avoid a broad ruling that could disrupt markets.
In 2020, the court decided a new CFPB case, finding that Congress improperly protected the agency's head from removal. The judges said the director could be replaced by the president at will, but allowed the agency to continue functioning.
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