Washington D.C. – The U.S. Supreme Court delivered a significant ruling on May 16, 2024, upholding the constitutionality of the Consumer Financial Protection Bureau's (CFPB) unique funding mechanism. In a 7-2 decision in the case of Consumer Financial Protection Bureau v. Community Financial Services Association of America, Ltd., the Court reversed a lower court ruling that had challenged the agency's financial independence. The decision clears the path for the CFPB to intensify its regulatory and enforcement activities, impacting the financial industry and consumer protections.
The ruling addresses a long-standing legal challenge to the CFPB's structure, which draws its funding from the Federal Reserve System rather than through annual congressional appropriations. Opponents, including payday lenders and conservative groups, argued this funding method violated the Appropriations Clause of the U.S. Constitution, which dictates that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." The Supreme Court, in an opinion authored by Justice Clarence Thomas, found that this mechanism aligns with historical appropriations practices.
The implications of this decision are substantial for the financial sector. Prior to the ruling, numerous CFPB proposed rules and enforcement actions, including those related to credit card late fees and small business lending data, had been stayed in various courts pending the outcome. With the agency's funding structure affirmed, these regulations and enforcement efforts are expected to proceed.
CFPB Director Rohit Chopra indicated the agency would be "firing on all cylinders" and would "forge ahead with its law enforcement work" following the ruling. This signals a renewed push in consumer protection initiatives that had faced uncertainty. The decision is viewed as a victory for consumer advocates and a setback for financial industry lobbyists who sought to curb the bureau's authority.
The ruling has been described by some, such as Dinesh D'Souza, who stated on social media, "WOW! - Supreme Court delivers a massive 9-0 ruling!" While the sentiment reflects the significance of the decision, the actual vote count was 7-2, with Justices Samuel Alito and Neil Gorsuch dissenting. The Court’s affirmation of the CFPB's funding ensures its operational independence, allowing it to continue its mission of protecting consumers in the financial marketplace.