The U.S. Supreme Court rejected a challenge on Thursday that could have paved the way for a consumer protection regulator to be dismantled.
By a ruling of 7-2, the court determined that the Consumer Financial Protection Bureau (CFPB) ‘s unconventional funding mechanism is constitutional, delivering a setback to the business interests behind the challenge. Two trade associations representing financial services firms contended that it is unlawful for the agency to receive funding directly from the Federal Reserve instead of through the congressional appropriations process, the Daily Caller reported.
“For years, lawbreaking companies and Wall Street lobbyists have been scheming to defund essential consumer protection enforcement,” CFPB said following the ruling. “The Supreme Court has rejected their radical theory that would have devastated the American financial markets. The Court repudiated the arguments of the payday loan lobby and made it clear that the CFPB is here to stay.”
Justices Neil Gorsuch and Samuel Alito dissented, but the majority of the justices upheld that the agency can be funded by the Federal Reserve rather than through traditional appropriations. The ruling stands as a win for the Biden administration, although free-market groups have voiced disappointment with the decision.
The Consumer Financial Protection Bureau (CFPB) was established by Congress through the 2010 Dodd-Frank Act, a significant piece of legislation aimed at overhauling the financial industry following the mortgage meltdown of the late 2000s and the ensuing economic downturn.
“Although there may be other constitutional checks on Congress’ authority to create and fund an administrative agency, specifying the source and purpose is all the control the Appropriations Clause requires,” Justice Clarence Thomas wrote for the majority.
However, the ruling could set a precedent wherein a federal agency can “bankroll its own agenda without any congressional control or oversight,” Alito wrote in his dissent along with Gorsuch.
Iain Murray, director of the Competitive Enterprise Institute’s Center for Economic Freedom, expressed similar sentiments regarding the ruling.
“Sadly, the Court has given the green light to Congress to abrogate its own power of the purse. We can expect future Congresses to come up with ever more inventive ways to allow the executive branch to fund its whims,” Murray said. “The only hope for responsible government is for Congress to rediscover its own prerogatives and repeal unusual funding mechanisms for executive agencies that exercise more power over American citizens than the Post Office — starting with the CFPB.”
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