Supreme Court to Judge Consumer Bureau’s Fate

A picture of a white keyboard with a green Consumer Financial Protection Bureau key and a hand hovering over it about to push it

Answering the Consumer Financial Protection Bureau’s (CFPB) pleas, the Supreme Court on Monday agreed to take up a court case determining whether the bureau’s funding source is constitutional.

The CFPB appealed an appellate court ruling that determined the bureau, and every rule it has promulgated since opening its doors in 2011, is unconstitutional. The appellate court said because the CFPB’s funding comes from the Federal Reserve, which collects fees from member banks, rather than directly from Congress, the CFPB itself is unconstitutional. Therefore, all its actions since its founding also are unconstitutional, the appellate court said.

The CFPB appealed to the Supreme Court in November to take the case and overrule what it called the appellate court’s “unprecedented and erroneous” understanding of the Constitution’s Appropriations Clause.

If the Supreme Court upholds the ruling, the impact on financial services nationwide could be dramatic. Rules banks and financial institutions have operated under concerning lending, disclosures and vendor oversight could be overturned. Without the CFPB, federal regulatory oversight of banking and financial services would revert to pre-2011 rules overseen by the Federal Reserve, the Office of the Comptroller of the Currency, the Treasury Department and the Federal Trade Commission.

The case will likely be argued in the fall. A decision likely would not be issued until 2024.

The CFPB’s constitutionality has been challenged before. In a 2020 ruling, the Supreme Court said the bureau was unconstitutionally structured because its single director could be removed only “for cause.” However, the Supreme Court said making the director fireable by the president at will cured the unconstitutional structure, leaving intact the CFPB’s rules, guidance and oversight.

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