Supreme Court upholds federal watchdog for consumer financial sector

The U.S. Supreme Court ruled on Thursday that the method of funding for the Consumer Financial Protection Bureau, or CFPB, does not violate the constitution. The 7-2 ruling reversed a previous federal appeals court ruling against the watchdog agency. Congress founded the CFPB in 2011 to regulate the consumer financial sector, for things like mortgages and car loans.

What’s the issue with CFPB funding? The bureau receives funding directly from the Federal Reserve rather than the annual congressional budget. The Community Financial Services Association Of America, a group of money lenders, alleged that the format violated the Constitution’s appropriations clause. The appeals court sided with the lenders’ group and ruled that the CFPB’s mode of funding unconstitutionally isolated itself from congressional oversight. Despite federal law providing for the bureau’s funding, a direct appropriation is required, the appeals court wrote.

What was the majority opinion? The appropriations clause simply authorizes expenditures from a specified source of public money for designated purposes and the CFPB’s funding meets these requirements, Justice Clarence Thomas wrote. The bureau’s funding mechanism fits comfortably with the First Congress’ appropriations practice, he continued. Chief Justice John Roberts joined in the opinion, along with Justices Sonia Sotomayor, Brett Kavanaugh, Amy Coney Barrett, Ketanji Brown Jackson, and Elena Kagan.

What did dissenters say? Conservative Justice Samuel Alito released a dissenting opinion, joined by fellow conservative Justice Neil Gorsuch arguing that the majority’s ruling reduced the appropriations clause to scraps. The court has upheld a novel statutory scheme under which the powerful CFPB may bankroll its own agenda without any congressional control or oversight, Alito wrote.

Has CFPB said anything? The court’s decision is a resounding victory for American families and honest businesses, the agency wrote. Since 2011, it has delivered more than $20 billion in consumer relief to hundreds of millions of consumers have handled millions of consumer complaints, it said. The Court’s ruling means it will continue to enforce consumer protection despite opposition from what it called scheming Wall Street lobbyists, CFPB said in a statement.

Dig deeper: Read Joseph Slife’s report in the WORLD Magazine Archives on the CFPB’s creation.