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Supreme Court upholds Consumer Financial Protection Bureau in big win for Biden and Democrats
Payday loan companies claimed that the way the CFPB is funded was unconstitutional.
May 16, 2024, 10:32 am ET
• 4 minutes of reading
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 governing everything from credit cards to loans. personal and residential mortgages.
The courts decisionA 7-2 decision with Justices Samuel Alito and Neil Gorsuch dissenting, it is a major victory for the Biden administration and for Democrats who defended the independent agency as a bulwark against corporate financial abuses after the 2008 crisis.
Conservatives have spent years attacking the CFPB as a source of undue and costly government regulation. This case centered on a group of creditors who alleged that the CFPB’s indirect financing through the Federal Reserve System, rather than annual appropriations from Congress, violated the Constitution’s Appropriations Clause, which says no taxpayer money should be spent without “appropriations made by law.”
Justice Clarence Thomas, who wrote the opinion, said that although the associations presented several arguments for why the agency’s funding mechanism was constitutionally unsound, “none are convincing.”
“Under the appropriations clause, an appropriation is simply a bill authorizing expenditures from a specific source of public money for designated purposes,” Thomas wrote. “The statute providing the Bureau’s funding meets these requirements. We therefore conclude that the Bureau’s funding mechanism does not violate the Appropriations Clause.”
In a statement to ABC News, a CFPB spokesperson called the Supreme Court ruling “a resounding victory for both American families and honest businesses.”
“For years, lawbreaking companies and Wall Street lobbyists have plotted to defund essential consumer protection enforcement,” the spokesperson said. “The Supreme Court rejected their radical theory that would have devastated American financial markets. The Court repudiated the arguments of the payday loan lobby and made clear that the CFPB is here to stay.”
The US Supreme Court is seen, on April 25, 2024, in Washington.Mandel Ngan/AFP via Getty Images
The Thomas court’s 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 agency’s funding scheme, “if transplanted to the late 18th century, would have fit perfectly.”
Justice Alito, in a dissent joined by Gorsuch, criticized the majority’s interpretation as creating a loophole that would allow Congress to create agencies that “expend public funds in perpetuity” without direct congressional oversight.
“The framers would be shocked, even horrified, by this scheme,” Alito wrote.
“In short, centuries of historical practice show that the Appropriations Clause requires legislative control over the origin and disposition of money used to finance Government operations and projects,” he wrote.
ABC News’ Elizabeth Schulze and Alexandra Hutzler contributed to this report.