U.S. Supreme Court delivers rare big win to American consumers

Published May 16, 2024

By Rob Schofield

After many years of controversy and legal battles, the U.S. Supreme Court today upheld the funding model that Congress and the Obama-Biden administration used in 2010 to establish the federal Consumer Financial Protection Bureau.

Elected leaders and consumer advocates hailed the ruling as a rare but important win at the conservative-dominated high court.

Since its inception, the CFPB has met stubborn resistance from the chief targets of its regulatory activities — high-cost consumer lenders — who have challenged many of its rules and enforcement actions, as well as, effectively, the agency’s very existence.

Such challenges were the subject of today’s decision, which overturned a ruling from the 5th Circuity Court of Appeals. The case was brought by payday lenders who argued that CFPB rules regulating their industry’s activities were unconstitutional because of the way the agency is funded.

Unlike many federal government agencies, the CFPB is funded via allocations from the Federal Reserve, rather than through direct congressional appropriations. Payday lenders argued — and the Court of Appeals agreed — that this violated the Appropriations Clause of the Constitution by insulating the agency of congressional oversight.

In rejecting this argument, the Supreme Court ruled 7-2 that the funding model Congress selected was permissible and constitutional. In writing for the majority, Justice Clarence Thomas said, “the Bureau’s funding mechanism fits comfortably with the First Congress’ appropriations practice.” Justices Samule Alito and Neil Gorsuch were the two dissenters.

The ruling won swift approval from President Joe Biden, who called the decision “an unmistakable win for American consumers” and a defeat for “extreme Republicans and special interests.”

This is from a White House statement:

“Since President Obama and I created it in the wake of the Great Recession, the Consumer Financial Protection Bureau (CFPB) has worked to protect consumers from abusive practices by lenders, servicers, and special interests, and has lowered costs for hardworking families by going after junk fees. Under my Administration, the CFPB has delivered: providing nearly $9 billion in consumer relief and working to save consumers $20 billion per year going forward on credit card late fees, overdraft fees, and other junk fees.”

Senator Elizabeth Warren (D-Mass.), who is widely seen as the architect of the agency’s creation and one of its principal champions in the years since, issued a statement expressing similar sentiments:

“The CFPB is here to stay. In a 7-2 decision, the Supreme Court followed the law and confirmed that the CFPB’s funding structure is constitutional. For the last decade, the consumer agency has fought the big banks and predatory lenders that try to cheat hardworking people. As of this week, the CFPB has returned more than $20 billion in ill-gotten funds to American families. This isn’t the last attack on the CFPB we’ll see from Wall Street, the banks, and their Republican allies. When an agency is this effective at sticking up for working families against industry’s consumer abuses, it’s an obvious target for multi-million dollar lobbying campaigns. The CFPB will keep on doing its work to slash junk fees, fight giant banks when they cheat people, and level the playing field for everyone in this country. I commend Director Chopra for his leadership, the entire CFPB team for their determination, and President Biden for his commitment to protecting consumers.” 

Consumer advocates echoed these comments. In a statement, Adam Rust, Director of Financial Services for the Consumer Federation of America, assessed the ruling similarly:

“Today, the consumers of America won the battle in court….In this ruling, the Court correctly concluded that the CFPB’s funding structure satisfies the Constitution’s Appropriations Clause. Since its beginning in 2011, the CFPB has returned $19 billion to consumers in direct relief. The repeated challenges to its independence and rulemakings from industry reflect the fact that the CFPB has been so successful in fulfilling its mission.”