In September 2023, a federal judge granted an injunction delaying the compliance dates for the CPFB Section 1071 final rule while the Supreme Court heard a separate case – involving the same parties - weighing the constitutionality of the CFPB’s funding structure.
In May 2024, the Supreme Court preserved the Consumer Financial Protection Bureau (CFPB) by upholding the bureau’s funding mechanism as constitutional in a 7-2 vote.
The justices’ decision caps a battle that marked the biggest legal threat to the CFPB since it was established in the wake of the 2008 financial crisis.
As previously reported, two lender trade associations – including the American Bankers Association (ABA) - backed by business groups and all the nation’s Republican state attorneys general, contended the agency’s funding from the Federal Reserve violates Congress’s so-called “power of the purse”. Writing for the majority, Justice Clarence Thomas rejected that argument and sided with the Biden administration. Conservative justices Samuel Alito and Neil Gorsuch were the only two justices to dissent.
Established as part of the Dodd-Frank Wall Street reform law, lawmakers looked to insulate the CFPB by creating a funding mechanism outside Congress’s annual appropriations process. In its ruling, the high court acknowledged that the CFPB is “different” than other agencies but determined its method of drawing funds from the Federal Reserve System that its director has deemed “reasonably necessary to carry out” is constitutional.
The ABA issued a brief update on how this ruling affects the other lawsuits ABA and others have brought against the CFPB on several policy issues.