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Supreme Court upholds Consumer Financial Protection Bureau, a major victory for Biden and Democrats

The Supreme Court on Thursday upheld the Consumer Financial Protection Bureau and the way Congress decided to fund the agency, rejecting a constitutional challenge from the banking industry and preserving a broad set of regulations that govern everything from credit cards to personal loans and real estate mortgage loans.

The court’s ruling, a 7-2 vote with Justices Samuel Alito and Neil Gorsuch dissenting, is a major victory for the Biden administration and Democrats who have defended the independent agency as a bulwark against corporate financial abuse after the crash of 2008.

Conservatives have spent years attacking the CFPB, calling it a source of unwarranted and costly government regulation. That case centered on a group of payday lenders who alleged that indirect funding of the CFPB through the Federal Reserve rather than annual appropriations from Congress violated the Appropriations Clause of the Constitution, which states that no money from taxpayers should not be spent without “statutory appropriations”.

Justice Clarence Thomas, who wrote the opinion, said that although the associations made several arguments as to why the agency’s funding mechanism was not constitutionally sound, “none is compelling.”

“Under the Appropriations Clause, an appropriation is simply an Act that authorizes expenditures from a specified source of public money for a designated purpose,” Thomas wrote. “The statute providing funding for the Bureau meets these requirements. We therefore conclude that the Bureau’s funding mechanism does not violate the Appropriations Clause.”

PHOTO: The United States Supreme Court is seen, April 25, 2024, in Washington.

The Supreme Court of the United States meets on April 25, 2024 in Washington.

Mandel Ngan/AFP via Getty Images

Thomas’ opinion was joined by Chief Justice John Roberts and Justices Sonia Sotomayor, Elena Kagan, Amy Coney Barrett and Ketanji Brown Jackson.

Justice Kagan wrote in a concurring opinion that the office’s financing plan, “had it been transplanted to the late 18th century, would be perfectly in place.”

Justice Alito, in a dissent joined by Gorsuch, blasted the majority’s interpretation as creating a loophole that would allow Congress to create agencies that “spend public funds in perpetuity” without direct congressional oversight.

“Framers would be shocked, even horrified, by this plan,” Alito wrote.

“In summary, centuries of historical practice show that the Appropriations Clause requires legislative control over the source and destination of money used to finance government operations and projects,” he wrote.

ABC News’ Alexandra Hutzler contributed to this report.

ABC News

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