The US Supreme Court has published its opinion on Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA), affirming the constitutionality of the agency’s funding mechanism. The decision was 7-2. Justice Alito wrote the dissenting opinion. Justice Gorsuch joined in dissenting.
The CFPB commented on the decision:
“Today’s decision is a resounding victory for American families and honest businesses alike, ensuring that consumers are protected from predatory corporations and that markets are fair, transparent, and competitive.”
The CFPB aims to be a watchdog for infractions by financial services firms pertaining to consumers.
While most agencies are funded through an appropriations process that passes through Congress, the CFPB is funded by the US Federal Reserve.
The CSFA filed the lawsuit in 2018 as part of a broader appeal claiming the “CFPB’s structure is unconstitutional under the Constitution’s separation of powers because the agency’s powers are concentrated in a single, unchecked Director who is improperly insulated from both presidential supervision and congressional appropriation, and hence unaccountable to the American people.”
The CEO & President of the American Financial Services Association (AFSA), Bill Himpler, issued the following statement:
“While there may be CFPB staff breathing a sigh of relief over this ruling, this Supreme Court decision does nothing to bring clarity or transparency for consumers, the consumer credit marketplace or Congressional oversight. The result may well be continued confusion over unclear CFPB guidance, ongoing uncertainty with rulemaking by blog post and selective enforcement actions, and an agency not bound by robust congressional oversight. We remain committed to work with Congress, the Biden administration and the CFPB on clear policies and a regulatory process that both protects consumers and their access to the credit products to meet their financial needs.”
Chairman of the House Financial Services Committee, Patrick McHenry, echoed the concern of AFSA:
“Despite the setback from today’s ruling, Republicans will continue the fight to rein in the rogue CFPB. To be clear, this Supreme Court opinion yet again emphasizes that Congress has exclusive authority and discretion over federal agencies’ funding structures. The House must urgently take up Congressman Andy Barr’s CFPB Transparency and Accountability Reform Act. This commonsense legislation will fix the mistakes of Dodd-Frank which set the dangerous precedent of tapping the central bank to fund partisan political objectives. It’s past time the CFPB is held accountable to the American people through their elected representatives.”
The CFPB is a young agency that has been a political football since its inception. The first Director, Richard Cordray, caught the ire of Republicans, especially when he refused to step down after Donald Trump was elected President. The Court eventually determined the President could change the leadership of the CFPB at will.
