The Supreme Court ruled in a 7-2 decision on Thursday to uphold the funding structure of the Consumer Financial Protection Bureau (CFPB), a federal watchdog agency established in response to the 2008 financial crisis. The ruling rejected claims from the payday lending industry that sought to challenge the bureau's funding mechanism.
The Biden administration, which supported the CFPB's funding model, argued that invalidating the bureau's funding would have undermined years of consumer-friendly banking regulations related to mortgages, car loans, and credit cards. The CFPB was created by Congress in 2010 to safeguard consumers from financial scams.
Republicans have historically been critical of the CFPB, which was originally proposed by Senator Elizabeth Warren of Massachusetts. The payday lending industry had challenged a 2017 CFPB rule that restricted repeated attempts to withdraw payments from accounts after insufficient funds, leading to additional banking fees for borrowers.
The 5th US Circuit Court of Appeals had previously ruled that the CFPB's funding structure violated the principle that only Congress should control funding decisions. However, the Supreme Court's decision affirmed the bureau's funding mechanism, which relies on the Federal Reserve system's earnings, ensuring the CFPB's independence from political influence.
Justice Clarence Thomas, writing for the majority, emphasized that the CFPB's funding arrangement met constitutional requirements and provided necessary safeguards against partisan interference. The decision was seen as a rebuke to the 5th Circuit's stance on the issue.
Justice Samuel Alito, in a dissenting opinion joined by Justice Neil Gorsuch, expressed concerns about the CFPB's financial autonomy and the potential implications of the majority's ruling. Alito argued that the bureau's funding structure granted it excessive independence, contrary to the appropriations clause's intent.
This ruling marks a significant development in the ongoing debate over the CFPB's authority and funding structure. The Supreme Court's decision reaffirms the bureau's mandate to protect consumers and maintain financial regulations, while also addressing concerns about its operational independence.
