Supreme Court Rules Against Community Financial Services Association
On May 16, 2024, the U.S. Supreme Court issued its opinion in Consumer Financial Protection Bureau, et al. v. Community Financial Services Association of America, Ltd., et al. Case No. 22-448. The primary challenge in this case was brought by “several trade associations representing payday lenders and credit-access businesses” in an effort to claim that the manner in which the Consumer Financial Protection Bureau (“CFPB”) was funded was unconstitutional. This was a challenge brought in an effort to undermine the CFPB given its enforcement actions against various businesses.
The CFPB is not a traditionally funded governmental agency, which would normally be funded through appropriation legislation approved by Congress and allowing funding to flow from the treasury department to the agency. Instead, when Congress created the CFPB, the funding was to obtained from “the Federal Reserve System, the amount determined by the Director to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law.” (12 U.S.C. § 5497.)
The Court in Consumer Financial Protection Bureau ruled 7-2, that the funding mechanism set up by Congress for the CFPB “satisfies the Appropriations Clause.” This ruling resolves any doubt as to the legitimacy of the CFPB, at least as far as any attacks on its existence by virtue of its somewhat unique funding source. The hope from the various trade associations was that this ruling would prohibit the CFBP’s operations, and potentially unwind its previous actions. However, that goal was not accomplished.
Given the ruling in Consumer Financial Protection Bureau, it appears that the CFPB will be here for the foreseeable future.
The full Opinion can be found here.
