U.S. Supreme Court to Hear Challenge to Consumer Financial Protection Bureau’s Funding Structure

The U.S. Supreme Court is gearing up to hear a challenge to the funding structure of the Consumer Financial Protection Bureau (CFPB), a consumer watchdog agency established after the 2008 global financial crisis. This case marks the beginning of the Court’s new term and could potentially have far-reaching implications for the power of federal agencies.

The Biden administration is appealing a lower court’s ruling that found the CFPB’s funding design to be in violation of a constitutional provision that grants Congress the power of the purse. Currently, the CFPB draws its funding from the Federal Reserve rather than from budgets passed by lawmakers.

The challenge to the CFPB’s funding structure comes from trade groups representing the high-interest payday loan industry. These groups filed a lawsuit in 2018 targeting a CFPB rule that prevents lenders from attempting to charge a borrower’s bank account after two unsuccessful attempts due to insufficient funds.

Supporters of the CFPB argue that upholding the agency’s funding mechanism is crucial to protecting consumers from deceptive and abusive practices. They also highlight the potential legal uncertainties that could arise if the agency’s existing rules were put on shaky ground.

Established in 2010 by Democratic-backed legislation signed by former President Barack Obama, the CFPB has played a significant role in curbing predatory lending and has provided $16 billion of relief to American consumers through its enforcement actions. Notably, the agency reached a $3.7 billion settlement with Wells Fargo last year.

Opposition to the CFPB has long been voiced by conservatives and their Republican allies, who view the agency as part of an unwieldy “administrative state.” Critics argue that the agency contributes to the extensive network of federal regulations that impact businesses and individuals.

The Supreme Court’s conservative majority, which currently stands at 6-3, has previously rolled back the power of federal agencies in significant rulings, including the Environmental Protection Agency. The outcome of this case will be closely watched as it could have implications for the future of federal agency power.

As the Supreme Court begins its new term, the case challenging the funding structure of the CFPB will be heard on the second day. The decision reached by the Court will have implications for the balance of power between federal agencies and Congress.