Supreme Court sides with Consumer Financial Protection Bureau, rejecting conservative attack

WASHINGTON — The Supreme Court on Thursday rejected an attack by conservatives that could have undermined the Consumer Financial Protection Bureau.

The justices ruled 7-2 that the way the CFPB is funded does not violate the Constitution, overturning a lower court ruling. Justice Clarence Thomas wrote the majority opinion, splitting with his frequent allies, Justices Samuel Alito and Neil Gorsuch, who dissented.

The CFPB was created after the 2008 financial crisis to regulate mortgages, auto loans and other consumer credit. The case was brought by payday lenders who object to a bureau rule that limits their ability to withdraw funds directly from borrowers’ bank accounts. It’s among several major challenges federal regulators face this term for a court that for more than a decade has been open to limits on their operations.

The CFPB, the brainchild of Democratic Sen. Elizabeth Warren of Massachusetts, has long faced opposition from Republicans and their backers. The bureau claims to have returned $19 billion to consumers since its inception.

Unlike most federal agencies, the Office of Consumer Affairs does not rely on Congress’ annual budget process. Instead, it is funded directly by the Federal Reserve, with a current annual limit of about $600 million.

The federal appeals court in New Orleans, in a groundbreaking decision, ruled that the funding violated the Constitution’s Appropriations Clause because it improperly shielded the CFPB from congressional oversight.

Thomas returned to the early days of the Constitution in his majority opinion to note that “the Bureau’s funding mechanism fits well with the appropriations practice of the First Congress.”

In dissent, Alito wrote: “The Court supports a new statutory scheme under which the powerful Consumer Financial Protection Bureau (CFPB) can fund its own program without any control or oversight from Congress. »

The CFPB case was argued more than seven months ago, during the first week of the court’s term. Lopsided rulings like Thursday’s 7-2 vote don’t usually take that long, but Alito’s dissent was longer than the majority opinion, and two other justices, Elena Kagan and Ketanji Brown Jackson, wrote briefs. separate opinions even though they were both part of the majority. .

Consumer groups welcomed the decision, as did a bureau spokesperson.

“For years, law-breaking corporations and Wall Street lobbyists have been plotting to defund critical consumer protections,” bureau spokesman Sam Gifford said in a statement. “The Supreme Court rejected their radical theory that would have devastated America’s financial markets. The Court rejected their radical theory that would have devastated America’s financial markets. rejected the arguments of the payday lending lobby and made clear that the CFPB was here to stay.”

While the U.S. Chamber of Commerce and other business interests have backed payday lenders, mortgage bankers and other industries regulated by the CFPB have warned the court to avoid a sweeping ruling that could disrupt markets.

In 2020, the court ruled on another CFPB case, finding that Congress improperly protected the bureau chief from removal. The justices said the director could be replaced by the president at will, but allowed the office to continue operating.

___

Follow AP coverage of the U.S. Supreme Court at https://apnews.com/hub/us-supreme-court.