Supreme Court upholds funding structure for federal consumer financial protection agency

In a victory for American consumers, the U.S. Supreme Court ruled the Consumer Financial Protection Bureau’s funding structure is constitutional. The high court rejected arguments brought by the payday loan industry.

Rather than receiving money through an annual appropriation from Congress, the CFPB gets funding through the Federal Reserve which is funded through bank assessments.

The case came to the court after the Fifth Circuit Court of Appeals’ ruling that funding for the CFPB violates the U.S. Constitution’s Appropriations Clause, which states that the federal government may spend money to fund an activity only when Congress has passed a law “appropriating” funds for that activity.

Congress created the CFPB after the 2008 financial crisis, consolidating in one place responsibilities that had been scattered across government.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which lays out how the CFPB operates, set up a structure to protect the CFPB from political influence by making the agency independent from Congress’s annual appropriation process.

Accountable.US, a government watchdog group, called for the dismissal of all lawsuits in lower federal courts against CFPB enforcement actions and new regulations that cited the payday lenders’ lawsuit as their basis for rejecting the CFPB’s independence and authority. Since CFPB v. CFSA made its way to the U.S. Supreme Court in November 2022, courts ordered stays in at least 10 of the CFPB’s enforcement cases. 

“This lawsuit brought by predatory lenders was only ever about one thing: taking out the best line of defense consumers have against financial industry scams, price-gouging and abuse,” Caroline Ciccone, president of Accountable.US, said in a statement. “The reason the Consumer Financial Protection Bureau is so effective at making wronged consumers whole is because of its independence, which is why shady industry CEOs and lawmakers in their pocket wanted to jam up the agency’s funding with politics and lobbyist money.”

Among the biggest losers in this decision is the conservative Fifth Circuit that advanced this lawsuit from predatory lenders and has sided with industry over consumers in a number of cases citing the same baseless arguments, said Ciccone. 

“The Fifth Circuit’s credibility continues to suffer as it willingly plays along with industry judge and venue shopping schemes that corrupt our judicial system,” she said.

Others losers include every conservative in Congress pushing bills to roll back consumer protections based on false notions about the CFPB’s constitutionality, Ciccone said, adding these lawmakers should finally put consumers first rather than the financial industry lobbyists that bankrolled their campaigns.