In a landmark decision, the Supreme Court upheld the Consumer Financial Protection Bureau (CFPB) in a 7-2 vote, preserving the agency’s funding mechanism as constitutional. The ruling marked the end of a battle that posed the biggest legal threat to the CFPB since its establishment after the 2008 financial crisis to combat predatory lending and enforce consumer protection laws.
The case revolved around the agency’s funding from the Federal Reserve, with two lender trade associations and Republican state attorneys general arguing that it violated Congress’s power of the purse. However, Justice Clarence Thomas, writing for the majority, rejected this argument and sided with the Biden administration, stating that the Bureau’s funding mechanism met the requirements of the Appropriations Clause.
Conservative justices Samuel Alito and Neil Gorsuch dissented, expressing concerns about the erosion of Congress’s power of the purse. They criticized the decision for allowing the CFPB to fund its agenda without congressional oversight.
Established as part of the Dodd-Frank Wall Street reform law, the CFPB was designed to operate independently with a funding mechanism outside of Congress’s annual appropriations process. Republicans have long criticized the agency for its lack of congressional control.
Despite a previous ruling in 2020 that deemed the CFPB’s leadership structure unconstitutional, the agency remains intact following the recent decision. The Supreme Court’s decision reaffirms the CFPB’s authority and independence in regulating financial institutions and protecting consumers.