The Supreme Court on Thursday upheld the U.S. consumer protection agency that was created under President Obama and congressional Democrats to protect Americans from financial scams.
By a vote of 7 to 2, the justices rejected a constitutional claim brought by a coalition of payday lenders that had won before a three-person panel appointed by Trump to the Fifth Circuit Court of Appeals.
The lower court had questioned the legality of the agency and ruled that it was not properly “accountable to Congress” because it did not receive its funding through an annual appropriation.
Writing for the majority, Justice Clarence Thomas said that early American history shows that Congress could fund the government through different means, not just through an annual appropriation.
“Based on the text of the Constitution, the history against which that text was enacted, and Congressional practice immediately following ratification, we conclude that appropriations need only identify one source of public funds and authorize the expenditure of those funds to purposes designated to satisfy the appropriations clause. ”He wrote in CFPB v. Consumer Financial Services Association.
Justices Samuel A. Alito Jr. and Neil M. Gorsuch dissented.
Alito faulted the court for upholding “a novel legal scheme under which the powerful CFPB can fund its own agenda without any control or oversight from Congress.”
Consumer advocates welcomed the decision.
“This ruling upholds the independent funding structure that has made the CFPB a successful advocate for protecting consumers and holding big banks, payday lenders and other financial institutions accountable,” said Devon Ombres, chief policy officer. legal advice from the Center for American Progress. A ruling upholding the Fifth Circuit Court “could have put the entire financial regulatory system at risk and roiled financial markets.”
“Predatory lenders and companies that rip off consumers with illegal junk fees have been trying to undermine the CFPB since its inception,” said Lauren Saunders, associate director of the National Consumer Law Center.
When creating the new office, Congress decided to finance it with credit fees from the Federal Reserve. Had the Supreme Court ruled that such funding was unconstitutional, its decision would also have cast doubt on the Federal Reserve.
In defense of the office, Biden administration lawyers argued that throughout American history, Congress has created agencies and offices such as the Post Office, the National Mint, the Bureau of Customs and the Patent Office, which were financed by fees, not by an annual appropriation from Congress. .
The CFPB called the decision “a resounding victory for both American families and honest businesses, ensuring that consumers are protected from predatory corporations and that markets are fair, transparent and competitive… For years, companies that break the law and Wall Street lobbyists have been plotting to defund essential enforcement of consumer protection.”
Its statement said that since the office opened its doors in 2011, it “has delivered more than $20 billion in consumer assistance to hundreds of millions of consumers and has handled more than 4 million consumer complaints.”
Thursday's decision is the latest sign that Supreme Court conservatives are unwilling to approve the far-right rulings of Trump-appointed judges in Texas and Louisiana.
On Wednesday, judges overturned a decision by two Trump appointees in Louisiana that would have blocked the use of a new state electoral map with two majority-Black districts.
Still pending before the court is a conservative challenge to the availability of abortion drugs. Since 2000, the Food and Drug Administration has said these pills are safe and effective in terminating premature pregnancies. But anti-abortion doctors went to Texas and won rulings that could strictly limit the dispensing of pills.
The consumer protection bureau that was confirmed Thursday was conceived by Sen. Elizabeth Warren (D-Mass.) when she was a law professor.
The office became the centerpiece of the 2010 Dodd-Frank overhaul of financial regulations following the collapse of the mortgage market.
Its mission was to protect borrowers and consumers from deceptive and unfair practices by banks and mortgage lenders.
But it has been consistently opposed by much of the lending industry and many Republicans, who say the agency has too much unchecked power.
Congressional Democrats who created the office tried to protect it from Washington politics, but that led to problems in the courts.
Under the 2010 legislation, the director of the office could not be removed by the president for political reasons, and the office's budget was outside the bounds of the annual congressional appropriations process. Instead, its funding comes from the Federal Reserve, which earns fees on the loans. The office used $641 million of that money last year.
Conservatives on the Supreme Court had looked skeptically at the office. Four years ago, the justices, in a 5-4 decision, rejected the director's independent status and ruled that the president could remove the person for any reason, including political differences.
The current dispute began as a challenge to a proposed regulation of payday lenders.
In ruling in favor of the lenders, the three Fifth Circuit judges, all appointed by President Trump, said it violated the Constitution to protect the bureau from an annual fight over its appropriation.
Judge Cory Wilson said that “the office's perpetual isolation from Congress's appropriations power, including express exemption from congressional review of its funding, renders it…no longer accountable to Congress and ultimately “instance, before the people.”
